China Dec PMI recovers to 53.3 from Nov 8-month low of 52.8 - CLSA

The December CLSA purchasing manager's index (PMI) for China rose from an eight-month low in November thanks largely to sharp increases in production and new orders, although rapidly rising costs have squeezed profits.

China's PMI was 53.3 in December, up from 52.8 in November.

"December's survey data signalled that growth of the Chinese manufacturing economy recovered slightly at the end of the year, after slowing sharply during the previous month," CLSA said in a statement.

It added, however, that the December survey showed evidence of mounting price pressures, as input costs and output charges rose at record rates.

"The key issue revealed by the December PMI was not the pace of growth but inflation and margin pressure... as in previous months, input price inflation is far above output price inflation," CLSA's head of economic research Eric Fishwick said.

"Pressure to control costs is apparent in a wide range of the PMI indicators. Finished goods and raw materials inventories are being reduced and for the for first time in more than a year employment is being cut," Fishwick added.

Cost increases for fuel and general raw materials led almost 60 pct of firms to say their average purchase prices rose, while less than three pct indicated a fall, CLSA said.

With pressure on profit margins continuing to mount, firms raised their selling prices for finished goods at the fastest rate in the CLSA's survey's 45-month history, the note said.

But it added that December helped make the fourth quarter the strongest of the year in terms of overall growth, with the main strength of demand coming from the domestic market, while new export orders were subdued at their weakest level for five months.