China's slowdown continues as factory gauge slips

BEIJING • A gauge of China's manufacturing industry weakened in December, underscoring concerns over the slowing domestic economy and the possibility of a lengthy trade war.

The manufacturing purchasing managers index (PMI) fell to 49.4, falling below 50, the line between expansion and contraction, for the first time since 2016.

The gauge of new orders for export was 46.6, down from 47 last month.

The non-manufacturing PMI, which reflects activity in the construction and services sectors, rose to 53.8 from 53.4.

"This survey has been the most sensitive to the trade war with the United States and, more broadly, softer global and domestic conditions," Moody's Analytics Inc economists led by Ms Katrina Ell wrote in a note dated Dec 21.

"We expect further overall softening in December, as local stimulus has had only a modest lift on domestic demand and the pause button was not pressed on the trade war until early December."

The US agreed to postpone a tariff hike on US$200 billion (S$273 billion) of imports from China until March 1 as both sides try to strike a deal over several issues.

The weak result comes after data showed the slowdown deepening in November, with industrial production growth at its weakest in a decade. Yet there are some signs of stimulus taking effect, with fixed-asset investment rebounding and the surveyed jobless rate improving marginally.

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A version of this article appeared in the print edition of The Straits Times on January 01, 2019, with the headline 'China's slowdown continues as factory gauge slips'. Print Edition | Subscribe