The manufacturing sector continued to weaken as 2018 came to a close, according to a key monthly gauge, with indicators such as output and new orders signaling that China’s economic slowdown will likely extend well into the new year.
The official Purchasing Managers’ Index (PMI) dropped 0.6 points to 49.4 in December, beneath the 50 level that demarcates expansion from contraction. This was the lowest reading since the start of 2016, and fell short of the market expectation of 49.9.
The sector was already on a months-long run of slowing growth. In November, industrial output grew by the smallest margin in nearly three years. The total output sub-gauge last month slipped further to 50.8 from 51.9.
New orders – considered a good gauge of the sector’s future health – dipped to 49.7 amid a general lull in global demand.
The unofficial Caixin PMI, which tends to focus more on smaller- and medium-sized businesses, also weakened in December to 49.7 from 50.2, reflecting a “deterioration in overall operating conditions”, according to the release.
The non-manufacturing PMI was more upbeat, rising to 53.8 from 53.4. This may indicate that services, which account for over half of the Chinese economy, are already feeling the benefit of government stimulus measures aimed at boosting the private sector.