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--Official Mfg PMI Above 50 For 17th Consecutive Month
--Official Services PMI Rose to 55 From 54.8 in November
--CFLP Predicts 6.9% GDP Growth For Year
     BEIJING (MNI) - PMI data released Sunday by the China Federation of
Logistics and Purchasing:
          Manufacturing PMI  Services PMI
-----------------------------------------
December               51.6          55.0
November               51.8          54.8
     Note: Readings above 50 indicate expansion in the sector, while readings
below 50 signal contraction. The higher the PMI reading above 50, the faster the
expansion in the sector. The lower the reading below 50, the faster the
contraction.
     FACTORS:
     --Manufacturing new orders index fell to 53.4 in December from 53.6 in
November.
     --Manufacturing production index fell to 54.0 in December from 54.3 in
November.
     --Input price index rose to 62.2 in December from 59.8 in November.
     --Business expectations index rose to 58.7 in December from 57.9 in
November.
     --New export orders rose to 51.9 in December from 50.8 in November
     TAKEAWAYS: The official China manufacturing purchasing managers index
(PMI), jointly released by the China Federation of Logistics and Purchasing
(CFLP) and the National Bureau of Statistics, edged down to 51.6 in December
from 51.8 in November. 
     The slowdown in December manufacturing PMI matched the median forecast of
an MNI survey predicting a reading of 51.6. 
     The December reading was the 17th consecutive month that manufacturing
sentiment has remained above the 50-point mark, which divides expansion from
contraction. It was also the 15th consecutive month that the index has been
above the 51-point mark. 
     The CFLP attributed the overall PMI slide to a slight slowdown of
production and new orders. The production index fell 0.3 percentage point to
54.0 in December from last month, while the overall new orders index eased 0.2
percentage points to 53.4. 
     "The headline showed steady growth of the economy as industrial output
remained robust and domestic and overseas demands remained balanced," CFLP
economist Zhang Liqun said. 
     The employment sub-index inched down to 48.5 from 48.8 in November. Raw
material inventories also contracted at a faster pace, dropping to 48.0 in
December from 48.4 the month before. Supplier delivery times continued to
deteriorate from 49.5 to 49.3. 
     The sub-indexes of finished goods inventories and orders on hand were still
below 50.
     Despite the drop in overall sentiment, the price and export indexes
strengthened. 
     "The new export orders index increased 1.1 percentage point to 51.9% as
global trade is accelerating due to the economic recovery," NBS economist Zhao
Qinghe noted.
     Input and output prices grew faster in December after two consecutive
months of deceleration. Input prices rose 2.4 percentage points to 62.2, while
output price growth increased to 54.4 from 53.8. 
     "This resulted from the short supply of raw materials and rising cost of
transportation," Zhao explained.
     Manufacturers' confidence about the future rose to three-month high, with
the business expectations sub-index increasing to 58.7 from 57.9. 
     For the whole year, the PMI averaged 51.6, with every month above the 51
level.  
     "Based on the performance of PMI, we predict the whole year GDP growth
would be 6.9%," said CFLP economist Chen Zhongtao, adding "benefiting from
supply-side reform and improvement in the business environment, most
manufacturers ... are making profits, and willingness of production is
expanding."
     The employment sub-index was 49.2 for the whole of 2017, up 0.9 percentage
point from last year and the highest in recent years, the CFLP noted.
     However, many new problems appeared over the course the year. Production
costs rose as the prices of raw materials picked up due to supply shortages.
Thirty-seven percent of manufacturers complained about rising prices in the
second half of the year, up 10 percentage points from the same period last year,
the CFLP warned.
     The structural problem in employment was magnified by the increasing demand
for professional and skilled workers. Fourteen percent of companies said they
had problems finding skilled workers, 3.1 percentage points higher than last
year.
     "The good outcome of the 2017 economy has laid a solid foundation for
growth in 2018," the CFLP's Chen said. "GDP should remain in a reasonable range
at around 6.5% next year."
     The CFLP services PMI rose in December to 55.0 from November's 54.8
reading. The CFLP attributed the growth to an increase in new orders at the
year-end. 
     Wu Wei, a CFLP economist, said the rapid growth of input prices in the
services sector could trigger high costs, and so needs to be watched closely.
     The whole-year services PMI stood at 54.6, 0.9 percentage points higher
than last year, Wu said.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
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