Caixin China Manufacturing PMI (December 2024) is a disappointment at 50.5

  • vs. expected 51.7 and prior of 51.5

In really brief, some highlights lowlights:

  • New orders and output growth both slow from November
  • Employment down marginally
  • Average selling prices decline despite rising input prices

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From the report, in summary.

  • Overall Expansion:

    • The manufacturing sector continued to expand for the third consecutive month, with the PMI at 50.5 (above the neutral 50.0 mark) but down from 51.5 in November, indicating a marginal growth rate.

  • Production and Orders:

    • Production increased for the 14th consecutive month, but the growth rate slowed.
    • New orders rose for the third month, driven by domestic demand, while export orders declined after strong growth in November.

  • Employment and Inventory:

    • Employment levels declined for the fourth month, though at a softer pace.
    • Purchasing activity and stocks of raw materials increased as some manufacturers built safety stocks.
    • Post-production inventories grew for the seventh consecutive month, but at a slower pace due to softer production growth.

  • Price Trends:

    • Selling prices fell for the first time since September as manufacturers absorbed cost increases to support sales.
    • Input prices continued to rise, while export charges also declined.

  • Capacity and Backlogs:

    • Backlogs of work rose due to new orders but at a marginal pace, reflecting reduced capacity pressures.

  • Business Confidence:

    • Business optimism weakened to its lowest since September, with concerns about trade tensions (e.g., U.S. tariffs) and growth outlooks affecting expectations for 2025.

This report highlights a mixed picture of sustained, but moderating, growth in China's manufacturing sector as external demand and cost pressures weigh on optimism.

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Comparing the two manufacturing PMIs from China each month:

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As background to this, over the past six months, China's manufacturing sector has exhibited varied performance, as reflected in the Caixin China General Manufacturing PMI and the official National Bureau of Statistics (NBS) Manufacturing PMI.

Caixin China General Manufacturing PMI:

  • July 2024: Decreased to 49.8, indicating a contraction in manufacturing activity for the first time in nine months.

  • August 2024: Rose to 50.4, signaling a return to expansionary territory and market improvement.

  • September 2024: Fell to 49.3, marking the lowest reading since July 2023 and reflecting a downturn in new orders.

  • October 2024: Increased to 50.3, indicating a return to expansion, supported by renewed growth in output and new orders.

  • November 2024: Further rose to 51.5, the fastest expansion since June, driven by strong growth in foreign orders and output.

NBS Manufacturing PMI:

Comparison:

  • Trend Alignment: Both indices generally moved in tandem, reflecting similar trends in the manufacturing sector.

  • Magnitude of Change: The Caixin PMI often exhibited more pronounced fluctuations, possibly due to its focus on smaller, private firms, compared to the NBS PMI's broader scope, including larger state-owned enterprises.

  • Expansion and Contraction Signals: Both PMIs indicated periods of contraction and expansion, with the Caixin PMI showing a quicker return to expansion in October, while the NBS PMI indicated expansion starting in October as well.