By William Kazer
BEIJING--An initial measure of China's factory activity slumped
to a seven-month low in December, pointing to a sluggish
performance for the world's second-largest economy in the last
quarter of the year.
The weak reading was particularly disappointing after a cut in
interest rates last month--the first in more than two years--and
more government stimulus measures aimed at boosting a sluggish
economy.
"Domestic demand slowed considerably," said HSBC economist Qu
Hongbin in a statement accompanying the data release. "The
manufacturing slowdown continues in December and points to a weak
ending for 2014."
An initial reading of the HSBC China Manufacturing Purchasing
Managers' Index, a gauge of nationwide manufacturing activity, fell
to 49.5 in December, below the 50 point cutoff that separates
growth from contraction compared with the previous month. The HSBC
manufacturing PMI showed a final reading of 50.0 in November.
Subindexes for output, new orders, employment and stocks of
purchases and finished goods all lost ground during the month,
though new export orders showed an increase.
Economists noted that the reading was taken relatively early in
the month due to the year-end holidays, and that undercut some of
the weight that could be attached to the data.
Nonetheless, analysts said it was hardly a robust reading.
Kevin Lai, economist at Daiwa Capital Markets, said the poor
preliminary PMI reading for December on top of weak October and
November data could mean gross domestic product growth of only
about 6.9% in the final quarter. China's gross domestic product
expanded 7.3% year-over-year in the third quarter, and that was the
weakest level in five years.
"The components in the PMI look quite soft," said Mr. Lai.
"We are rapidly losing momentum," he said, adding this was a bad
sign for global growth as China's demand for a wide range of
materials has long helped fuel expansion in economies around the
world.
The preliminary PMI figure, also called the HSBC flash China
PMI, is typically based on 85% to 90% of total responses to HSBC's
PMI survey each month.
The preliminary reading, which is usually issued about one week
before the final PMI reading, was released more than two weeks
before the final estimate for December. The final reading is due on
Jan. 2.
Write to William Kazer at william.kazer@wsj.com
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