China’s Private Sector Growth Slows Down In December

China’s Private Sector Growth Slows Down In December
January 7, 2020


The greenback rose against the Chinese yuan yesterday after the Caixin China Composite Purchasing Managers’ Index (PMI) for December signaled a slowdown of the manufacturing and services sector in China. From a low of 6.96246, the USD/CNY pair rose to a high of 6.97769 in the past 24 hours.

According to survey data published by IHS Markit, China’s private sector growth fell at the end of 2019 as both the services and manufacturing sector recorded feeble rates of expansion. The Caixin composite Purchasing Managers’ Index declined to 52.60 in December, after recording a 21-month high of 53.20 in the earlier month. Nevertheless, a figure above 50 indicates expansion.

The Purchasing Managers’ Index for the service sector decreased to 52.50 in the last month of 2019, from a seven-month high of 53.50 in November. Interestingly, manufacturing output recorded robust growth at the end of 2019, even though the rate of growth declined to a three-month low.

Goods manufacturers received fresh orders at the slowest rate in four months. However, service providers recorded a robust rise in sales, reflecting the fastest growth since September. At the composite level, new export business expanded at the slowest pace for the three months.

On the whole, jobs across the service and manufacturing sectors increased marginally at the end of 4Q19. Additionally, the study indicated that at the composite level, backlogs rose at a mildly quicker pace.

December data also suggest a further decline in the rate of input price inflation as expenses increased at the slowest rate for four months. Selling prices also increased at only an insignificant pace.

Notably, in December, Chinese manufacturing enterprises had an optimistic outlook for the forthcoming year. However, the level of positivism pronounced by service sector companies inched down to the second-lowest level on record.

Moving forward, the phase one trade agreement between the US and China is anticipated to aid recovery in corporate sentiment, according to Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Global.

Zhengsheng Zhong said, “China’s overall economy continued to stabilize.” Furthermore, according to Zhong, will have a solid start in 2020, but will be restricted by weak demand for the remaining part of the year.

China’s economic growth has dropped to 6.2%, the slowest rate of expansion in the past thirty years. Economists predict the economy to slow down further this year, with some forecasting growth to decline below 6% for the first time since 1990.

The historical price chart indicates that the USD/CNY pair is rising after testing the support at 0.9670. Additionally, the Chaikin money flow indicator is trading above the zero level. Therefore, we are anticipating the currency pair to move up further in the near-term.

yua - technical analysis - 7th Jan 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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