Overview of December PMI Data

China’s December 2024 Purchasing Managers’ Index (PMI) data presented a mixed picture of the economy. While the manufacturing PMI slightly declined to 50.1 (-0.2 points month-on-month), the non-manufacturing PMI experienced a significant rebound, reaching 52.2 (+2.2 points month-on-month). This marked the strongest expansion in the past eight months, driven by a recovery in the construction and services sectors.

Manufacturing PMI: Stabilization Amid Challenges

The manufacturing PMI dipped marginally to 50.1, slightly below Bloomberg’s expectation of 50.2, reflecting stabilization after November’s uptick. Key highlights include:

• New Orders: Increased to 51.0 (+0.2 points month-on-month), indicating moderate demand growth.
• Manufacturing Output: Declined marginally to 52.1 (-0.3 points month-on-month), signaling slight production weakness.
• New Export Orders: Remained weak at 48.3 (+0.2 points month-on-month), reflecting ongoing export headwinds.
• Pricing Pressures: Outdoor prices fell to 46.7 (-1.0 points month-on-month), and purchase prices dropped to 48.2 (-1.6 points month-on-month), indicating diminished pricing power.
• Business Expectations: Weakened to 53.3 (-1.4 points month-on-month), reflecting cautious sentiment in the sector.

Non-Manufacturing PMI: A Robust Rebound

The non-manufacturing PMI surged to 52.2, marking its strongest expansion in eight months. This growth was driven by improvements in both the construction and services sectors:

• Construction Activity: Jumped to 53.2 (+3.5 points month-on-month), supported by enhanced infrastructure project execution by local governments.
• Services PMI: Improved to 52.0 (+1.9 points month-on-month), reflecting a broader recovery in domestic consumption.
• New Orders: Increased significantly to 48.7 (+2.8 points month-on-month), highlighting improving demand.
• Employment: Stabilized at 45.8 (+0.4 points month-on-month), though still in contraction territory.
• Business Expectations: Strengthened to 57.5 (+0.5 points month-on-month), pointing to optimistic future sentiment in the sector.

Performance by Corporate Size

Corporate size performance varied significantly in December 2024:

• Large-Sized Enterprises: Activity softened slightly to 50.5 (-0.4 points month-on-month), indicating stable but subdued growth.
• Medium-Sized Enterprises: Expanded to 50.7 (+0.7 points month-on-month), demonstrating a steady growth trajectory.
• Small-Sized Enterprises: Continued to face challenges, with their PMI dropping to 48.5 (-0.6 points month-on-month), reflecting persistent headwinds from weak external demand.

Key Takeaways and Economic Outlook

December’s PMI data signals stabilization in economic activities with a potential shift to higher growth in the coming months. However, sustained policy support remains critical, particularly in light of rising geopolitical risks. The following trends were observed:

• Manufacturing Sector: Stabilizing but requiring stronger external demand and pricing power to drive growth.
• Non-Manufacturing Sector: Robust recovery in construction and services, signaling a positive outlook for domestic consumption.
• Corporate Size Disparities: While large and medium enterprises showed resilience, smaller firms continue to struggle amid external challenges.