China’s manufacturing activity contracts even more than expected

China reported lower than expected manufacturing activity in December amid its trade dispute with the U.S.

Official manufacturing Purchasing Managers’ Index (PMI) was 49.4 — lower than the 49.9 analysts expected in a Reuters poll.

That was worse than November’s official manufacturing PMI, which was 50.0.

A reading above 50 indicates expansion, while a reading below that signals contraction.

Economic data from China is being closely watched amid the ongoing trade war between Washington and Beijing.

At the beginning of December, U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day ceasefire that delayed the planned Jan. 1 U.S. increase of tariffs on $200 billion worth of Chinese goods while they negotiate a trade deal.

On Saturday, Trump said on Twitter that he had a “long and very good call” with Xi and that a possible trade deal between the two countries was progressing well.

China’s economy has been facing headwinds domestically as well.

Even before the escalation in trade tensions with the U.S. this year, Beijing was already trying to manage a slowdown in its economy after three decades of breakneck growth.

The results of another private manufacturing survey focused on small and mid-sized firms will be released on Wednesday.

China’s official PMI gauge focuses on large companies and state-owned enterprises, while the private survey by Caixin and IHS Markit focuses on small and medium-sized enterprises.

—Reuters contributed to this report.