China Dec Factory Contraction Deepens, More Stimulus on the Cards

• China's manufacturing activity shrank for a third straight month in December and weakened more than expected, clouding the outlook for the country's economic recovery and raising the case for fresh stimulus measures in the new year.
• The government has, in recent months, introduced a series of policies to shore up a feeble post-pandemic recovery, which is being held back by a severe property slump, local government debt risks, and soft global demand. But the world's second-largest economy is still struggling to gain traction.
• China's central bank said it would step up policy adjustments to support the economy and promote a rebound in prices amid signs of rising deflationary pressures. Notably, China's consumer prices fell the fastest in three years in November, while factory-gate deflation deepened, weighed by weak domestic demand.
•  Weak external demand also remained a major drag on factory activity, with new export orders index registering 45.8 in December, contracting for the ninth straight month. The sub-index of factory gate prices was at 47.7, contracting for a third straight month, adding to signs of deflation and pressure on business profits.
• The official non-manufacturing purchasing managers' index (PMI), which includes services and construction, rose to 50.4 from 50.2 in November, supported by a recovery in the vast services sector.

(Source: Reuters)