Chinese factories’ activity in December slows, higher costs hit businesses

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BEIJING, #Jan.4 (#Reuters) – #Activity in #China’s factory sector increased in #December as the world’s second-largest economy continued to recover to pre-pandemic levels, according to a business survey on #Monday, however , increasing cost pressures have slowed the pace of expansion.

The #Caixin / #Markit #Manufacturing #Purchasing #Managers #Index (PMI) fell to 53.0 from 54.9 in #November, with the gauge remaining well above the 50 level that separates growth from contraction , but missing expectations and slowing down to the lowest rate in three months.

#Analysts polled by #Reuters had forecast the stock reading to drop to 54.8.

#China’s vast industrial sector has seen an impressive recovery from the coronavirus shock thanks to surprisingly strong exports. The economy is expected to grow by around 2% for all of 2020 – the weakest pace in more than three decades, but much stronger than other major economies still struggling to contain infections.

#However, stricter coronavirus controls in many of its major trading partners in the west could hurt industrial demand, weighing on the recovery.

#Caixin’s PMI reading follows an official measure of factory activity, focusing more on large public companies, which are also moderate but remained strong.

“The negative impact of the pandemic on the national economy has further abated and the manufacturing industry has continued to recover. #Both supply and demand continued to improve. #Demand abroad has also increased steadily, ”wrote #Wang #Zhe, senior economist at #Caixin #Insight #Group, in a note accompanying the survey statement.

The private sector survey also showed that input prices had risen sharply, at the fastest rate since 2017, with more expensive raw materials, especially metals, being responsible for the increase. #Chinese factories have also laid off more workers than they were hiring for the first time in four months, although the decline has been modest.

“#We need to pay attention to the increasing pressure on costs induced by rising raw material prices and its negative impact on employment, which is particularly important for the design of the exit from the stimulus policies put in place. work during the outbreak, ”#Wang said.

The total new orders and factory output gauges slipped from #November, but remained strong. #Growth in new export orders also slowed.

“#We expect the economic recovery in the post-epidemic period to continue for several months, and macroeconomic indicators will be stronger over the next six months, given the weak bases in the first half of 2020,” #Wang said. (#Reporting by #Gabriel #Crossley; #Editing by #Sam #Holmes)

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