Chinese manufacturers signalled a renewed deterioration in operating conditions at the end of 2014, with both output and new orders falling slightly on the month. In contrast, new export business continued to increase in December, and at a slightly quicker rate than in November. In response to lower total new orders, firms cut their workforce numbers again in December, albeit only slightly. On the prices front, both input prices and output charges fell at the sharpest rates in nine months.
After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 49.6 in December, down from 50.0 in November and the first deterioration in operating conditions since May. That said, the rate of deterioration was only marginal.
Manufacturing employment in China declined again in December, thereby extending the current sequence of job shedding to 14 months. However, the rate of reduction eased to the weakest infive months. Lower staff numbers contributed to an increased amount of work-in-hand (but not yet completed) in December. Furthermore, the rate of accumulation quickened to a solid pace that was the strongest since March 2011. Lower production requirements led to the first reduction in buying activity since April, albeit only slight. Stocks of purchases meanwhile fell for the fifth straight month, with a number of companies mentioning stocks had fallen in line with softer client demand. Stocks of finished goods also fell in December, though only fractionally.
Average input costs faced by Chinese goods producers fell for the fifth month in a row during December. Moreover, the rate of reduction accelerated to the sharpest since March. Anecdotal evidence suggested that lower raw material prices helped to reduce their cost burdens at the end of the year. Prices charged by manufacturers also fell in December and a the most marked rate in nine months. Increased competitive market pressures led to a number of monitored companies to discount their tariffs over the month.