China’s December factory activity growth misses expectations

China’s factory activity growth in December missed analysts’ expectations Tuesday, signaling that Beijing’s stimulus measures were not sufficient to meaningfully boost the country’s ailing economy.

The country’s official purchasing managers’ index for December came in at 50.1, data released by the National Bureau of Statistics data showed.

The reading missed Reuters’ expectations of 50.3. Manufacturing activity came in 50.3 in November and 50.1 in October. A PMI reading above 50 indicates expansion in activity, while a figure below that points to contraction.

Production and new orders for sectors including agricultural and sideline food processing, general equipment and food and beverages rose, the National Bureau of Statistics said.

China’s non-manufacturing PMI, which measures activity in the services and construction industries, rose to 52.2 in December, compared to 50.0 the month before.

Out of the 21 industries surveyed, 17 logged higher activity than the month before, including aviation, transportation and telecommunications. The construction industry also returned to expansion, lifted by upcoming Spring Festival holidays.

“I think one of the reasons last month [when] we had a big swing in the non manufacturing PMI, [it] was partially because construction PMI declined a lot,” said Tommy Xie, head of Asia macro research at OCBC.

Investors will also be monitoring the Caixin/S&P Global manufacturing purchasing manager’s index slated to release on Thursday.

“For the Chinese economy, the year of 2024 will be remembered as a year of muddle-through,” said Larry Hu, Macquarie Group’s chief China economist.

“Deflationary pressures have persisted as policy stimulus is just enough to hit the GDP target, but far from enough to reflate the economy,” he added.

China’s economy has shown some recovery following a slate of stimulus measures introduced from late September.

“Overall, we are still seeing that [Chinese] recovery is still ongoing,” said Xie. “China is going to achieve around 5% growth target for this year, maybe around 4.9%. So we are seeing a small piece of recovery for 2024,” he added.

The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, reflecting the recent policy adjustments. It now expects China’s GDP to grow 4.9% in 2024 compared with its previous projection of 4.8%, while in 2025.

However, other recent economic data from China indicates that the world’s second-largest economy is still in the throes of disinflation, largely due to tepid consumer demand and a prolonged downturn in the property market.

China’s consumer inflation fell to its lowest level in five months in November, while the country’s export and import figures fell short of expectations. Additionally, the latest retail sales data also disappointed, missing Reuters’ forecasts.

China’s industrial profits extended declines to a fourth straight month, dropping 7.3% in November from a year earlier.

Last week, China’s finance ministry announced it would increase fiscal support next year to help boost consumption by expanding consumer goods trade-ins, raise pensions as well as medical insurance subsidies for residents.

China’s authorities have also decided to issue 3 trillion yuan ($411 billion) in special treasury bonds next year — the largest amount on record — to ramp up fiscal stimulus efforts, according to Reuters.

China will be facing greater challenges with Donald Trump in the White House. Trump’s threat to impose higher tariffs on Chinese goods could further dent China’s export sector, which is already dealing with increased trade barriers from the European Union.