Chinese manufacturing contracts as industry hits seven-month low

Billy Ehrenberg
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China's manufacturing PMI has shrunk for the first time since May (Source: Getty)

Chinese manufacturing has hit a speed bump, falling off a six month period of growth to record its lowest score in seven months.

According to data from HSBC and Markit, the flash purchasing manager’s index score was 49.5 in December, below the 49.8 predicted by analysts, on a scale where a 50.0 equals growth. It is the first time the sector has contracted since May.

Output and new orders were down, as was employment, though new export orders were up.

Hongbin Qu, HSBC’s chief China economist, said:

Domestic demand slowed considerably and fell below 50 for the first time since April 2014. Price indices also fell sharply. The manufacturing slowdown continues in December and points to a weak ending for 2014. The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.

The Chinese Central Bank has already injected some money into the economy (around 1.8 trillion yuan (£185.5bn) according to speculation) but is wary of doing so and is famously clandestine in its operations.

The manufacturing data will be a concern for industries such as mining, which is heavily exposed to the Chinese market.

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