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Home / Business / China's factory activity falls for the first time in 2 1/2 years: Official Reuters PMI

China's factory activity falls for the first time in 2 1/2 years: Official Reuters PMI




. © Reuters. FILE PHOTO: Employees work on a production line that manufactures light trucks at a JAC Motors plant in Weifang

. (Beijing) (Reuters) – China's factory operations declined for the first time in more than two years in December, easing demand and increasing pressure on the world's second-largest economy to head for 201

9.

The official purchasing managers index (PMI) fell to 49.4 in December, below the critical value of 50 points, which according to data growth and contraction separates on Monday published by the National Bureau of Statistics (NBS).

It was the first decline since July 2016 and the weakest PMI since February 2016, when it was 49.0. Analysts surveyed by Reuters had predicted that the official value for the month would drop to 49.9.

The increasing burden on factories signals a sustained loss of economic momentum and increases risks for both China and the global economy, especially if tensions between China and the US persist.

There are already signs that trade conflicts between the economic giants are affecting global supply chains, with concerns that the impact could intensify next year, impacting world trade and investment.

The Chinese authorities are expected to introduce additional supportive measures in addition to a series of policy initiatives this year. A prolonged downturn in the factory sector, which is crucial for jobs and the overall health of the economy, would likely bring further steps towards a revival of domestic demand.

There is also uncertainty as to whether China and the United States can bridge their differences during a temporary ceasefire in their trade war.

Earlier this month, US President Donald Trump and Chinese President Xi Jinping voted to hold a 90-day ceasefire that delayed the planned $ 200 billion increase in tariffs on Chinese goods in January while making a trade agreement negotiated.

New export orders contracted for a seventh consecutive month due to volatile sub-index foreign demand from 46.0 to 46.6 versus 47.0 the month before.

"There are many short-term orders from overseas, but few long-term orders that have been cautious by Chinese factories remain in the face of trade uncertainties," said Nie Wen, economist at Hwabao Trust in Shanghai, said before the PMI publication ,

"The medium to long term export prospects are not particularly optimistic."

In contrast, the factor-activity meter, also published on Monday PMI for non-manufacturing industries, rose from 53.4 in November, well above 53.4 the 50-point mark, which separates growth from contraction.

The service sector accounts for more than half of the Chinese economy, with rising wages giving Chinese consumers more purchasing power. However, consumer demand and confidence have recently begun to falter as signs of increasing pressure on the economy.

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