China's manufacturing and services sectors are struggling to recover after experiencing a slowdown throughout the second half of 2021 due to COVID-19 restrictions and the energy crisis.
On Friday (31/December), China's National Bureau of Statistics released the Manufacturing PMI data which rose from 50.1 to 50.3 in December. This gain surpassed the forecast for a decline to 50.0, as well as marking China's manufacturing which is still stable in expanding at the end of 2021.
Previously, the manufacturing index declined for seven straight months and had fallen in the contraction zone in September and October. The surge in commodity prices in international markets, global supply chain bottlenecks, and the energy crisis due to the disconnection of coal distribution routes due to floods are some of the factors that suppress manufacturing activity.
However, the revival of the Manufacturing PMI in the last two months is a promising outlook, especially in the midst of the spread of the Omicron variant of COVID.
Resilient Non-Manufacturing, China's Economy Still Vulnerable
Meanwhile, China's Non-Manufacturing PMI data also expanded in December. Sentiment for the construction and service sectors is known to have risen from 52.3 to 52.7. This data also recovered from the contraction zone, but the growth trend was considered to be more stable than the manufacturing sector.
The Chinese yuan weakened limited following the release of PMI data this morning. USD/CNY is up 0.08 percent and is trading at 6.3731 as of this writing, not far from the range of price movements formed since December 11.
Overall, the fundamental data this time reflects the Chinese economy is still struggling to bounce back from the slowdown in the second half of 2021. Some analysts expect China's fourth quarter GDP to fall to below 4 percent, far down from the 18.3 percent increase during the first quarter. The gloomy outlook for the Chinese economy is quite reasonable considering the consumption sector is still below pre-COVID levels. It should be noted that the consumption sector is one of the main contributors to China's GDP calculation.
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