BEIJING, Jan. 4 (Reuters) – Activity in the Chinese manufacturing sector rose in December as the world’s second-largest economy recovered to pre-pandemic levels, a business survey showed on Monday, but rising cost pressures slowed the pace of expansion delayed.
The Caixin / Markit Manufacturing Purchasing Managers’ Index (PMI) fell from 53.9 in November to 53.0, with the benchmark staying well above the 50 level that separates the growth from the contraction, but expectations are lacking and to the softest rate in three months.
Analysts polled by Reuters predicted the rate reading would drop to 54.8.
The large industrial sector in China has achieved an impressive recovery from the coronavirus shock thanks to surprisingly strong exports. The economy is expected to expand by about 2% for the whole of 2020 – the weakest pace in more than three decades, but much stronger than other large economies still struggling to contain infections.
However, stronger coronavirus controls in many of its major trading partners in the west could stave off demand for the industry, which could outweigh the recovery.
The Caixin PMI reading comes after an official measure of manufacturing activity, which focused more on larger and state-owned enterprises, which also moderated but remained strong.
“The negative impact of the pandemic on the local economy has further diminished and the manufacturing industry has continued to recover. Both the supply and demand side continued to improve. Overseas demand has also gradually increased, ”writes Wang Zhe, senior economist at Caixin Insight Group, in a note releasing the survey.
The survey in the private sector also showed that input prices have risen sharply, at the fastest rate since 2017, with more expensive raw materials, especially metals, being blamed for the rise. Chinese factories also laid off more workers than they hired for the first time in four months, although the decline was modest.
“We need to note the increasing pressure on costs caused by rising commodity prices and their detrimental effects on employment, which is particularly important for designing the stimulus policies implemented during the epidemic,” Wang said. .
Meters of total new orders and factory production have slipped since November, but have remained strong. Growth in new export orders also slowed.
“We expect the economic recovery in the post-epidemic era to continue for several months, and macroeconomic indicators to be stronger in the next six months, given the low bases in the first half of 2020,” Wang said. said. (Reporting by Gabriel Crossley; Edited by Sam Holmes)