BEIJING—A gauge of China’s factory activity showed more sluggishness in December, with the world’s second-largest economy ending the year on a weak note.
The latest data showed manufacturing activity in China contracted in December. AGENCE FRANCE-PRESSE/GETTY IMAGES
Analysts said that the final reading of the HSBC Manufacturing Purchasing Managers’ Index, though slightly better than a preliminary figure, still pointed to problems ahead for the country’s factories amid flagging domestic demand.
“It’s not a good sign for next year,” said Lu Zhengwei, chief economist at Industrial Bank Co. in Shanghai.
The HSBC PMI, a gauge of nationwide manufacturing activity, fell to a final reading of 49.6 in December from 50 in November, HSBC Holdings PLC said Wednesday. A reading below 50 indicates a contraction in manufacturing activity from the previous month, while a reading above that shows expansion.
“Today’s data confirmed the further slowdown in the manufacturing sector towards year-end, ” HSBC’s chief economist for China, Qu Hongbin, said in a statement. “We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing in the coming months.”
China’s economy has been slowing this year. Data for November, including industrial output and investment, extended a string of disappointing results.
The economy grew at its slowest rate in more than five years in the third quarter, with a year-over-year expansion of 7.3%. Growth for the full year could fall below the government target of about 7.5%, and economists expect it to be closer to 7% in 2015.
The central bank has tried to inject liquidity into the banking system to give a boost to the cooling economy and reduce borrowing costs for struggling firms. It cut interest rates in November and then revised rules that allowed banks to lend more of their funds in December.
“The central bank will want to wait and see what the impact is before it takes any fresh measures,” said Mr. Lu, who also noted that strength in the service sector was partially offsetting manufacturing weakness.
Other economists said that the weak industrial sector partly reflected tougher environmental restrictions on polluting factories, and that more such regulations could be expected amid growing concerns over the environment.
The authorities “are going to kick off a new round of environmental measures, so that could be an issue for the overall industrial sector,” said Fan Zhang, economist at CIMB Securities in Shanghai.
The final reading of the HSBC PMI was up slightly from the initial tally of 49.5, announced Dec. 16. The preliminary figure is based on 85% to 90% of responses to its PMI survey.
Sub-indexes of output and new orders declined slightly in December. Manufacturing employment lost ground again, extending job shedding to 14 months, according to HSBC. Average input costs faced by Chinese producers fell for the fifth month in a row in December.
The HSBC China Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 420 manufacturing companies.
The official manufacturing PMI, a competing index published by China’s National Bureau of Statistics, is due out Thursday.
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