| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

Asia Economy Last Updated: Dec 30, 2010 - 11:17 AM

China's manufacturing activity fell to a three-month low in December; Japanese manufacturing contracted for fourth straight month but at slower pace
By Finfacts Team
Dec 30, 2010 - 11:11 AM

Email this article
 Printer friendly page
Source: Markit

China's manufacturing activity fell to a three-month low in December but rising raw material costs raised inflationary pressures according to a report on Thursday. Meanwhile Japanese manufacturing activity contracted for a fourth straight month in December but the rate of deterioration was the slowest in three months.

China: December data pointed to a continued improvement of Chinese manufacturing sector operating conditions. However, overall growth of the sector lost momentum, with both output and new business rising at the slowest rates in three months. The slowdown in new order growth was insufficient to prevent a further rise in backlogs of work, which in turn prompted firms to hire additional staff on average. Considering inflation, firms continued to pass on sharply rising input costs to clients through increased output charges.

The headline seasonally adjusted HSBC Purchasing’ Managers Index (PMI) fell to a three-month low of 54.4 in December, from 55.3 in November. Nonetheless, for Q4 as a whole, overall growth of the sector was the strongest since Q1 2010.

Manufacturing output increased steeply in December, albeit at the slowest rate in three months. Where a rise in output was signalled, panellists often linked growth to continued new business wins. The rate of expansion in new work eased since November, but remained strong in the context of historical data. Growth of new work was supported by strong underlying demand. However, data suggested that overall growth centred on the domestic market, with new export business increasing at a much slower rate than total new orders. Indeed, the rate of expansion in new export orders was only modest.

Outstanding business continued to rise in December, although the rate of growth eased since November. Further backlog accumulation predominantly reflected greater inflows of new business and, as a result, growing pressure on manufacturers’ operating capacity. Consequently, firms added to their staff numbers in December, with the rate of job creation quickening to the fastest since June.

Average input prices rose further in December. Although still substantial, the rate of input cost inflation eased to the slowest in three months. Higher raw material prices continued to drive inflation in the latest survey period, with basic metals mentioned in particular. Consequently, firms continued to pass on higher costs to clients through increased output charges. Similar to the trend in input prices, the rate of output price inflation eased since November, but remained much stronger than the long-run trend.

Commenting on the China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:  "Inflation rather than growth still remains as the top policy concern, despite the moderation in December’s manufacturing PMI reading. We expect Beijing to continue to relying on quantitative tightening measures to curb inflation and counter the impact of QE2, while modest interest rate hikes are also needed to anchor inflation expectations in the coming months."

The HSBC China Report on Manufacturing is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 manufacturing companies.

Source: Markit

Japan: December data pointed to another deterioration in Japanese manufacturing sector operating conditions, although the rate of contraction eased to the weakest in three months. This primarily reflected slower declines in output, total new business and employment. On the prices front, input cost inflation quickened to the fastest since May. However, output prices continued to fall amid strong competition for new work.

Manufacturing output in Japan fell further in December, albeit at the slowest rate in the three months of continuous decline. Where a fall in output was signalled, respondents widely attributed this to falling new business.

Overall new work fell solidly in December, as panellists continued to report underlying demand weakness. However, the pace of reduction eased to the slowest since September. In contrast, the rate of decline in new export business quickened to the fastest in twenty months. Anecdotal evidence suggested that reduced export sales reflected sluggish demand from external sources.

Spare capacity remained evident in December, with backlogs of work falling for the sixth month in succession. As a result, firms continued to reduce staff levels, albeit at only a marginal rate. Lower personnel numbers reflected employee retirements.

Slower lead times were signalled in the latest survey period, with panellists attributing this to supply shortages at vendors. However, the rate at which supplier performance deteriorated was only slight, as firms continued to reduce their purchasing in line with falling production requirements. That said, the rate of decline in buying activity eased since November.

Average input costs faced by Japanese manufacturing firms rose markedly in December, with the rate of inflation quickening to a seven-month high. Even so, the latest increase was slower than the long-run series average. Panellists cited higher raw material prices as the key driver of inflation, with cotton, petroleum, rare metals and steel mentioned in particular.

Despite a sustained rise in input costs, manufacturers continued to reduce their output prices in December. This primarily reflected strong competition for new business. There were also reports of client requests for lower prices. The latest decrease stretches the current period of decline to more than two years.

Commenting on the Japanese Manufacturing PMI survey data, Alex Hamilton, economist at Markit and author of the report said:  "Japan’s manufacturing sector continued to contract in December, bringing to a close a year of mixed fortunes. Output grew robustly in H1 2010 before losing steam and contracting towards year-end. Manufacturers remained hesitant with regards to hiring, as underlying demand weakness and spare capacity persisted in December. On the prices front, robust cost inflation, coupled with continued output price discounting, will likely place added pressure on firms’ operating margins heading into 2011."

The Markit/JMMA Japan Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies.

Related Articles
Related Articles

© Copyright 2010 by Finfacts.com

Top of Page

Asia Economy
Latest Headlines
IMF defers renminbi reserve decision; Devaluations losing firepower
Japan's trade deficit widens and GDP falls despite 33% yen devaluation
China's exports slide in July; Fx reserves dip $42.5bn in month
Chinese manufacturing PMI falls for 5th straight month in July; Japan at 5-month high
China's overseas investments to surge; Ireland got €99m of €46bn invested in EU in 2000-2014
China to overtake US economy in 2026; Income per capita will be 50% of US in 2050
Manufacturing activity in China and Japan contracted in June
China's manufacturing contracted for third straight month in May; Japan in slight rise
Asia accounts for 40% of global output, two-thirds of global growth
China's exports unexpectedly fell in April 2015 after March dip
China's growth in 2015 at slowest since early 2009
China's 2015 foreign trade continues to slide
Singapore remains world’s top location for business on 50th anniversary of independence
China's manufacturing activity fell to a 11-month low in March
China in surprise rate cut to boost sagging economy
Chinese Lunar New Year: Year of the Wood Goat begins this week
China’s manufacturing shrunk in January; Regional rise except Indonesia
Profits of Chinese industrial businesses plunged in 2014
China's growth in 2014 fell to a 24-year low
Services activity in China, Japan and India in moderate rises in December
China’s manufacturing industry remains competitive despite rising wages
China revises 2013 GDP up 3.4% to 56.5% of US economy size
China's manufacturing contracts in December; Japan's grows
China's imports slide in November; Emerging markets slow
Manufacturing PMI stalled in China in November; Fell in Korea, Indonesia , grew in India
China's manufacturing output contracted in November; Japan's accelerated
Ireland not among top 67 destinations for Chinese outbound FDI in 2014
Japan fell into recession in third quarter of 2014
Services slowed in China, contracted in Japan and stagnated in India in October
Manufacturing in South Korea/ Indonesia contracted in October; India in slight rise
Two Chinese manufacturing reports show trading near stagnation levels
Bank of Japan raises money printing target; Spending and wages plunge
China's manufacturing stagnates, Japan in moderate growth
China’s economy in third quarter grew at slowest pace in five years
Chinese exports jump in September; "Sadness will return soon"
World Bank cuts growth forecasts for developing East Asia including China
Japanese business confidence slightly improves; Manufacturing sector weak
Developing Asia remains fastest-growing region in world in 2014
Chinese manufacturing PMI rose slightly in September
Japan reports 26th straight monthly trade deficit; Public debt tops ¥1,000tn