China's manufacturing PMI edges up in December 2023

The slight uplift in the headline index was partly due to a stronger rise in new orders during December. Although modest, the latest increase in overall sales was the quickest recorded since February. Companies often mentioned that improved market conditions and greater client spending had supported the latest rise in new work. At the same time, the downturn in new foreign sales moderated in December, with new export business declining at a marginal rate that was the weakest in six months.

Higher amounts of new orders led manufacturers to raise output for the second straight month in December. The rate of growth was the most pronounced in seven months, albeit modest overall, as per the report.

Despite the quicker increases in production and sales, manufacturers maintained a cautious approach to staffing levels. Notably, employment across the sector fell for the fourth straight month, and at the quickest pace since May. Firms often mentioned that they had opted not to replace voluntary leavers or trimmed headcounts as demand was more subdued than expected. Moreover, companies indicated that capacity pressures eased in December, with backlogs of work falling for the first time in seven months.

Purchasing activity meanwhile stagnated after a marginal rise in November. A number of companies cited greater usage of existing stocks to cut costs, driving a further marginal drop in inventories of inputs. Stocks of finished goods meanwhile increased slightly, partly due to the delayed shipment of items to clients.

Manufacturers signalled the first deterioration in average supplier performance for three months in December. There were reports that delivery times had increased due to shortages of some raw materials and strained supplier capacity.

Although input costs continued to rise at the end of the year, the rate of inflation moderated to a four-month low and was only marginal. Concurrently, firms signalled only a fractional rise in selling prices, with companies often reluctant to pass on higher expenses to clients amid greater market competition.

Chinese manufacturers anticipate production to rise over the course of 2024 amid forecasts of firmer global demand, higher client spending and new product investment. However, the degree of optimism softened from November and remained below the series average.

ALCHEMPro News Desk (DP)