China_ December Caixin manufacturing PMI disappointed on external sector uncertainty. Thu Jan 02 2025

Industry and Company Overview * Industry: Manufacturing * Company: Not specified * Location: China Key Points 1. Caixin Manufacturing PMI: The December Caixin manufacturing PMI fell 1.0 point to 50.5, below expectations and largely reversing the rise in November. The output component fell 2.7 points to 50.5, and the new order component fell 1.4 points to 51.5. The new export orders component fell notably by 2.9 points to 48.6, the second lowest reading since September 2023. [2] 2. NBS Manufacturing PMI: The NBS manufacturing PMI showed a modest easing, with the output component falling 0.3 point to 52.1. The new order component rose 0.2 point to 51.0 in December. [5] 3. Mixed Signals: The Caixin and NBS PMIs have shown similar trends in the past three months, likely reflecting ongoing domestic policy support and growing concerns on external sector uncertainty and potential US tariff hike. [3] 4. Domestic Demand Outlook: The new orders component for the NBS PMI rose in December, suggesting steady domestic demand outlook amid policy support. [5] 5. Export Sector Sentiment: The export orders component for the Caixin PMI fell notably in December, reflecting heightened concerns of external sector uncertainty and potential US tariff hike. [5] 6. Pricing Environment: Both PMI reports showed generally weak pricing conditions, with ongoing PPI deflation pressure on the domestic economy and the export sector's pricing conditions weakening amid intense competition. [7] 7. Economic Outlook: The forecast for a solid sequential recovery in 4Q24 to 6.9% q/q saar (or 4.9%oya in 4Q vs. 4.6%oya in 3Q) remains unchanged. The full-year 2024 real GDP growth forecast is 4.84%, with a final outcome likely to be either 4.8% or 4.9% y/y. [8] 8. Nominal GDP Growth: Nominal GDP growth slowed to 4.1%oya in the first three quarters of 2024 and will likely print at 4.0% for the full-year, the second-worst reading since the data release in the 1990s. [8] 9. Policy Adjustments: Policy adjustments need to provide support for real economic activity, deal with deflationary pressure, and improve economic rebalancing, especially by improving household income, supporting domestic demand, and stabilizing private sector sentiment. [8]