China factory conditions weaken for 10th month

The latest PMI weakness is reflective of the slowdown in China, Singapore’s largest export destination.

It was also the first reading below the 50 threshold that separates growth from contraction since October 2013. It was reported today that the Chinese manufacturing contracted for the 10 straight month in December as demand remained weak and factories trimmed staff and output. “Whereas the frail rupee boosted growth of new business from overseas, corporate earnings can’t exclusively rely in external markets as global demand remains subdued”, she added.

Manufacturing has had its best year since 2010 as a lower Australian dollar makes locally produced goods more competitive with imports.

The official Purchasing Managers’ Index, a comprehensive gauge reflecting operational conditions in largely state-owned manufacturing companies, rose 0.1 from November to 49.7 in December, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

“That said, the rate of job creation was only modest”, the report said. More fluctuations in global markets are expected now that the US Federal Reserve has started raising interest rates. It needs to simultaneously push forward the supply-side reform to release its potential and reap the benefits. Panellists linked the decline in output to falling new orders and the Chennai floods, the release said. This supported further expansions in output, employment and buying activity. Part of the increase in costs was passed on by manufacturers.

Near stagnation in new orders is a key negative in the report, one that points to further slowing for the headline index in coming readings.

The reading was still above average for 2015 and means the sector has expanded for nearly three years.

Growth in new orders from overseas accelerated slightly from November and was faster than the long-run series average.

The rate of growth in December continued to fall from October’s recent high back down towards stagnation. “December’s manufacturing PMI suggests that the downturn in the industrial sector has much further to run”.

While the PMI was 50.9 in November 2015, the figure rose to 52.2 last month amid signs of recovery in the manufacturing sector, said the statement.