China’s factory activity expanded at a quicker pace in December due to stronger gains in output and new orders, but business confidence for 2024 remained subdued, a private-sector survey showed on Tuesday.
The Caixin/S&P Global manufacturing PMI rose to 50.8 at the end of 2023 from 50.7 in November, marking the fastest expansion in seven months and surpassing analysts’ forecasts of 50.4. The 50-point mark separates growth from contraction.
The sprawling manufacturing sector came under pressure amid weak demand in 2023, with a property downturn, geopolitical factors and tight-fisted consumers all weighing on the post-pandemic recovery.
Chinese top leaders at the end of last year pledged to adjust policy to support an economic recovery in 2024, while markets and investors are waiting for more stimulus measures to be rolled out.
The Caixin PMI contrasted with official data released on Sunday that showed manufacturing activity shrinking at a faster pace and more than expected in December.
Factory output in December rose at the quickest pace since May, while growth in new orders hit a 10-month high thanks to firmer demand and a pick up in customer spending at the year-end, according to the Caixin survey.
New export orders fell at a slower pace as some firms reported an improvement in external demand from November.
While factory owners continued to hold an optimistic view on 2024 outlook, their confidence edged down from November and remained below the series long-run trend.
They said squeezed customer budgets, tough competition and concerns over sluggish markets were among key concerns.
Stocks of finished goods increased slightly, partly due to the delayed shipment of items to clients. Although input costs continued to rise at the year-end, the rate of inflation moderated to a four-month low and was only marginal.
The data was collected Dec. 6-14, according to S&P Global.
Amid weaker-than-expected demand, factory owners cut payrolls for the fourth straight month and at the quickest pace since May.
“The expansion of market supply and demand did not translate to an increase in hiring,” said Wang Zhe, economist at Caixin Insight Group, adding some surveyed firms said existing capacity was sufficient to handle additional orders under the current market condition.
“Looking to the new year, there is still room for adjustments in fiscal and monetary policies,” Wang said, calling for strengthened efforts in increasing employment to alleviate pressure on the job market.