UPDATE 2-China factory activity contracts in December as slowdown deepens

31 Dec 2014 | Author: | No comments yet »

China’s manufacturing contracts in December.

BEIJING—A gauge of China’s factory activity showed more sluggishness in December, with the world’s second-largest economy ending the year on a weak note.SINGAPORE (Reuters) – Brent crude prices edged towards $57 a barrel on Wednesday as weak Chinese manufacturing data and demand concerns outweighed supply disruptions in Libya.BEIJING (AP) — A survey of Chinese manufacturers has found their activity contracted in December in a new sign the world’s second-largest economy is slowing despite government efforts to shore up growth. Analysts said that the final reading of the HSBC Manufacturing Purchasing Managers’ Index, though slightly better than a preliminary figure, still pointed to problems ahead for the country’s factories amid flagging domestic demand.

HSBC Corp. said Wednesday that its monthly purchasing managers’ index fell to 49.6 on a 100-point scale on which numbers below 50 show activity contracting. A reading below 50 indicates a contraction in manufacturing activity from the previous month, while a reading above that shows expansion. “Today’s data confirmed the further slowdown in the manufacturing sector towards year-end, ” HSBC’s chief economist for China, Qu Hongbin, said in a statement. “We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing in the coming months.” China’s economy has been slowing this year. The 50.0 mark separates growth from contraction. “If we see a (PMI) number well under 49.5, it might spark further stimulus speculation and that might end up being supportive,” McCarthy said of the HSBC/Markit reading.

On a light trading day, the Chinese equities in Hong Kong and Shanghai gained, with the Hang Seng China Enterprises Index up 0.7% and the Shanghai Composite Index rising by 0.5%. U.S. crude inventories rose by 760,000 barrels last week to 387.3 million, according to industry group the American Petroleum Institute, compared with analysts’ expectations for a decrease of around 100,000 barrels. The Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban on exports of most domestic crude, taking two steps expected to unleash a wave of ultra-light shale oil onto global markets.

A fire raging for almost a week at Libya’s biggest oil port of Es Sider has destroyed up to 1.8 million barrels of crude and damaged seven storage tanks, top oil official al-Mabrook al-Buseif said on Tuesday. The central bank has tried to inject liquidity into the banking system to give a boost to the cooling economy and reduce borrowing costs for struggling firms. The turmoil in Libya has caused the Organization of the Petroleum Exporting Countries’ oil supply to shrink 270,000 barrels per day (bpd) in December to a six-month low below OPEC’s target of 30 million bpd. It cut interest rates in November and then revised rules that allowed banks to lend more of their funds in December. “The central bank will want to wait and see what the impact is before it takes any fresh measures,” said Mr.

The authorities “are going to kick off a new round of environmental measures, so that could be an issue for the overall industrial sector,” said Fan Zhang, economist at CIMB Securities in Shanghai. So this data in a way is great for Chinese retail investors who trade on momentum: The slowdown is not a meltdown but enough to trigger more stimulus measures. The HSBC China Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 420 manufacturing companies.

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