China December official PMI likely to show fifth month of contraction

Tue Dec 29, 2015 3:24am EST
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BEIJING (Reuters) - Activity in China's manufacturing sector is expected to have contracted for a fifth straight month in December, a Reuters poll showed, likely consigning the world's second-largest economy to its slowest annual growth in a quarter of a century.

The official manufacturing Purchasing Managers' Index (PMI) is forecast to inch up to 49.7 from November's 49.6, according to a median forecast of 27 economists in a Reuters poll.

A reading below 50 points suggests a contraction in activity, while a reading above indicates an expansion on a monthly basis.

The official PMI factory reading will be released on Friday along with the official services PMI.

Analysts expect only a marginal improvement in the vast manufacturing sector in December from November, when activity fell to a three-year low.

Chronic overcapacity, sluggish demand at home and abroad and deflationary pressures are expected to continue to weigh on the sector next year.

"There were some bright spots in the economy in December such as a continued recovery in the housing market and an improvement in auto sales," said Nie Wen, an analyst at Hwabao Trust in Shanghai.

"But performances in these sectors do not necessarily boost the PMI above the 50-point level due to contractions in other industries."

Vehicle sales in China have rebounded after the government cut taxes on smaller cars from Oct. 1.   Continued...

Chinese flag waves in front of the Great Hall of the People in Beijing, China, October 29, 2015.  REUTERS/Jason Lee