The supply and demand in the manufacturing sector have increased, the market continues to warm up, and both production and demand maintain an expansion momentum, although the momentum has slowed down. The new export Order Index has fallen into the contraction Range, and corporate confidence has also weakened.

On January 2nd, Thursday, data released by S&P Global showed that China's December Caixin Manufacturing Purchasing Managers' Index (PMI) was 50.5, a decrease of 1 percentage point from the previous value of 51.5, but still above the breakeven line, indicating that the economy has been expanding for the third consecutive month.

The official manufacturing PMI released by the National Bureau of Statistics last week for December was 50.1%, down 0.2 percentage points from the previous month, remaining above the critical point for three consecutive months.

Senior economist Wang Zhe from Caixin Think Tank commented:

In December 2024, the expansion of supply and demand in manufacturing continued, with businesses increasing purchases and actively replenishing inventory; however, external demand is weak, employment pressure remains high, sales prices are sluggish, and market optimism has weakened. The combined effects of a series of stock and incremental policies since the end of September are continuing to be released, leading to more positive changes, with national economic operations generally stable, and the main goals for economic and social development throughout the year expected to be smoothly achieved.

At the same time, some sub-indices of the December Caixin China Manufacturing PMI have weakened, and the sustainability and effectiveness of previous policy stimulus effects need further observation. In 2025, the external environment will become more complex, and policies should be prepared in advance and respond in a timely manner. Additionally, subsequent policies need to focus on increasing residents' income and improving the livelihood, particularly enhancing the consumption capacity and willingness of vulnerable groups.

New Orders continued to increase, while new export orders contracted.

The manufacturing sector continues to expand, but the growth rates of new Orders and production have slowed, with the new export Orders Index falling into contraction.

New Orders continue to increase, maintaining growth for the third consecutive month, but the growth rate has slowed due to weakened external demand. Exports have become a drag on demand, with the external economic environment and international trade uncertainty increasing, leading the new export Orders Index to fall into the contraction Range, marking the fourth time in the past five months that this index has recorded below the threshold.

Manufacturing production has maintained growth for 14 consecutive months, but the growth rate has decreased to a slight level as the growth rate of new Orders has slowed. Meanwhile, new Orders have increased at the end of the year, resulting in a new wave of Business backlog, although the backlog rate has eased to a slight level.

The backlog work index has remained above the threshold for the third consecutive month. Purchasing inventories have also risen simultaneously, as it is reflected that some manufacturers intend to establish safety stocks.

Supplier Logistics has slightly accelerated. This is also the first time since June 2024 that the supplier delivery time index has risen above 50. In December, the purchasing volume index, finished goods inventory index, and raw materials inventory index continue to stay in the expansion Range, indicating that enterprises remain relatively active in restocking, although these three indices have decreased compared to the previous month.

Manufacturing employment continues to contract, with caution in employing staff among manufacturing enterprises. The employment index has been in the contraction range for the fourth consecutive month, with significant decreases in employment among investment goods and intermediate goods producers, while employment in consumer goods production enterprises remains stable.

Sales prices have fallen for the first time since September.

Manufacturing prices have seen both increases and decreases. The manufacturing purchasing price index has been above the threshold for the third consecutive month, but the extent is limited, with rising raw material costs being the underlying reason.

In contrast, sales prices fell for the first time after September, marking the fourth decline in the past six months due to intense market competition and a strong willingness among enterprises to cut prices for promotions. Surveyed companies indicated they chose to absorb the increased costs to support sales and further reduced product selling prices. Export prices also declined in December.

Business confidence has weakened.

Business confidence has weakened, with the production and operation expectation Index still expanding within the Range, but dropping more than 3 percentage points from the previous month, bringing optimism down to its lowest point since September.

Although there are hopes that new products and policies in the coming year can drive sales growth, businesses remain concerned about growth potential and trade prospects, especially considering tariff threats from the USA.