China's PMI declined modestly but remained in expansion territory at 51.4 for the month of December. Despite economic storm clouds on the horizon, PMI numbers indicate that the waters remain calm for now. Employment PMI remains stable. Construction seems to have improved despite the dramatic slowing of monthly housing prices. Most of the expansion remains domestically driven. But, growth still rests on the shoulders of large enterprises, most likely state-affiliated. Small and mid-sized firms continue to struggle.
All-in-all, prospects look stable at the end of 2016. But, problems going into the new year lurk below the surface. Decelerating housing prices, a rising corporate debt burden, slowing investment, outflow concerns, and a potential trade war on the horizon all threaten to shatter the current stability in the new year.
Here are some key numbers within the PMI data:
- Construction PMI was up 1.5 points from last month to 61.9. Construction new orders were up 4.1 points to 59.2.
Large enterprises had a PMI of 53.2. But, both small and mid-sized enterprises were in a state of contraction, with 47.2 and 49.6 respectively.
Manufacturing new orders remained unchanged at 53.2. New orders point to another month of stability.
Service employment PMI remained in expansion at 50.0. Service employment is the primary source of stability as China's old economy sectors falter.
PMI Data (select category on legend to see plot)