PMI slows as tighter policies bite
By Wang Yanlin |
January 2, 2011, Sunday
|
Print Edition
Print Edition
THE official Purchasing Managers Index moderated for the first time in four months, an indication of cooling manufacturing activities in China due to tighter monetary policies.
The official PMI, a comprehensive gauge of industrial activities across the country, was at 53.9 percent in December from November's 55.2 percent, the China Federation of Logistics and Purchasing said yesterday.
The result was similar to the HSBC PMI reading released last Thursday, which fell to a three-month low of 54.4 in December.
A reading above 50 indicates expansion in both surveys. While the HSBC survey is slanted more toward privately owned and export-oriented firms, the official PMI is weighted heavily toward large domestic companies.
"The rapid pace of moderation in the official PMI is unexpected," said Lu Zhengwei, an analyst at the Industrial Bank Co. "But this was inevitable once China shifted to a prudent monetary policy and with the overall economy due to grow at a slower pace this year."
Sun Wencun, an analyst at CITIC Securities Co, said the PMI usually expands quicker in December.
"The result shows that manufacturers in general expect further tightening policies as consumer and producer prices shot up," Sun said.
China has increased interest rates twice in the past three months to curb runaway consumer prices, which reached a 28-month high of 5.1 percent in November.
The Producer Price Index, the factory-gate gauge of inflation, jumped 1.1 percentage points to 6.1 percent in November, also a 28-month high.
"Rising commodity prices in the past few months mean Chinese manufacturers face a big challenge in controlling costs," said Zhang Liqun, an analyst at the federation.
Higher production prices have reduced profit margins for manufacturers. In the first 11 months of 2010, profit of industrial firms rose 49.4 percent year on year to 3.88 trillion yuan (US$585 billion), slower than the 51.6 percent pace through October.
The official PMI, a comprehensive gauge of industrial activities across the country, was at 53.9 percent in December from November's 55.2 percent, the China Federation of Logistics and Purchasing said yesterday.
The result was similar to the HSBC PMI reading released last Thursday, which fell to a three-month low of 54.4 in December.
A reading above 50 indicates expansion in both surveys. While the HSBC survey is slanted more toward privately owned and export-oriented firms, the official PMI is weighted heavily toward large domestic companies.
"The rapid pace of moderation in the official PMI is unexpected," said Lu Zhengwei, an analyst at the Industrial Bank Co. "But this was inevitable once China shifted to a prudent monetary policy and with the overall economy due to grow at a slower pace this year."
Sun Wencun, an analyst at CITIC Securities Co, said the PMI usually expands quicker in December.
"The result shows that manufacturers in general expect further tightening policies as consumer and producer prices shot up," Sun said.
China has increased interest rates twice in the past three months to curb runaway consumer prices, which reached a 28-month high of 5.1 percent in November.
The Producer Price Index, the factory-gate gauge of inflation, jumped 1.1 percentage points to 6.1 percent in November, also a 28-month high.
"Rising commodity prices in the past few months mean Chinese manufacturers face a big challenge in controlling costs," said Zhang Liqun, an analyst at the federation.
Higher production prices have reduced profit margins for manufacturers. In the first 11 months of 2010, profit of industrial firms rose 49.4 percent year on year to 3.88 trillion yuan (US$585 billion), slower than the 51.6 percent pace through October.
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