China's manufacturing shrinks, Japan, Korea expands, India skids
Two purchasing managers' index (PMI) surveys show that China's manufacturing contracted again in December while manufacturing activity in Japan and South Korea expanded but India's manufacturing shrunk.
China’s official manufacturing PMI mainly reflecting state-owned enterprises increased slightly from November but still indicated a contraction. The official manufacturing PMI was at 49.7, versus 49.6 in November. The 0.1 percentage point rise is stronger than the historical five-year average of 0.1 percentage point decline — a reading above 50 signals expansion.
The official non-manufacturing PMI, reflecting China’s services sector was at 54.4, versus 53.6 in November.
The private sector PMI report shows that operating conditions faced by Chinese goods producers continued to deteriorate in December. Production declined for the seventh time in the past eight months, driven in part by a further fall in total new work. Data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December. As a result, manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements. Meanwhile, deflationary pressures persisted, as highlighted by further marked declines in both input costs and selling prices.
Adjusted for seasonal factors, the Caixin PMI — a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy — registered below the neutral 50.0 value at 48.2 in December, down from 48.6 in the previous month. Business conditions have now worsened in each of the past 10 months. That said, the latest deterioration was modest overall.
Dr. He Fan, chief economist at Caixin Insight Group said:
The forces driving an economic recovery have encountered obstacles and the economy is facing a greater risk of weakening. More fluctuations in global markets are expected now that the US Federal Reserve has started raising interest rates. The government needs to pay more attention to external risk factors in the short term and fine-tune macroeconomic policies accordingly so the economy does not fall off a cliff. It needs to simultaneously push forward the supply-side reform to release its potential and reap the benefits.
Latest PMI data pointed to a further marked improvement in manufacturing operating conditions in Japan. New orders increased at a rate that matched October’s one-year high. This supported further expansions in output, employment and buying activity. Meanwhile, input prices increased at a historically weak rate, while charges declined slightly.
The headline Nikkei Japan Manufacturing PMIs derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. The headline PMI posted at 52.6 in December, unchanged from November (the highest reading since March 2014), thereby indicating a sustained marked improvement in operating conditions at Japanese manufacturers. Moreover, the latest index contributed to the strongest quarterly average (52.5) since Q1 2014 (55.3).
For the first time in ten months, the PMI data pointed to an improvement in operating conditions at South Korean manufacturers. Both production and new orders increased, leading to stronger employment growth and an increase in buying activity.
Meanwhile, both input and output prices fell sharply in December. On a negative note, international demand declined as new export orders decreased for the tenth month running. The headline Nikkei South Korea Manufacturing PMI indicates overall improvement of sector operating conditions at 50.7 in December, up from 49.1 in November, signalling an improvement in operating conditions at South Korean manufacturers for the first time in ten months.
Indian manufacturers saw business conditions deteriorate at the end of 2015. December’s incessant rainfall in Chennai impacted heavily on the sector, with falling new work leading companies to scale back output at the sharpest pace since February 2009. On the price front, inflation rates of both input costs and output charges were at seven month highs. Dipping from 50.3 in November to 49.1 in December, the seasonally adjusted Nikkei India Manufacturing PMI pointed to a deterioration in operating conditions across the sector, with the PMI posting below the no-change level of 50.0 for the first time since October 2013.
Pic on top: Soldiers carry out rescue work in Altay Prefecture, northwest China's Xinjiang Uygur Autonomous Region, 3 Jan, 2016 Photo: Xinhua