CHINA’S factory activity expanded in December as hot export demand fueled a recovery in the world’s second-largest economy from the coronavirus slump, although higher labor and transport costs slowed the pace of growth.

The official manufacturing Purchasing Manager’s Index (PMI) fell to 51.9 in December from 52.1 in November, data from the National Bureau of Statistics (NBS) showed Thursday.

The index remained above the 50-point mark that separates growth from contraction but was a tad below the 52 in a poll of analysts.

China’s vast industrial sector has staged an impressive recovery from the coronavirus shock thanks to surprisingly strong exports. The economy is expected to expand around 2 percent for the full year — the weakest pace in over 30 years but much stronger than other major economies still struggling to contain infections.

However, tougher coronavirus control measures in many of its key trading partners in the West and recent domestic infections could dent industrial demand, weighing on the recovery.

The official PMI, which largely focuses on big and State-owned firms, showed the sub-index for new export orders stood at 51.3 in December, easing from 51.5 a month earlier.

Economic indicators ranging from trade to producer prices all suggest a further pickup in the industrial sector.

A sub-index for small business activity stood at 48.8 in December, sharply down from November’s 50.1 and returning to contraction.

Zhao Qinghe, an official at the NBS, said in a statement accompanying the data release that small businesses were pressured by higher labor, raw material and distribution costs.

A sub-index for employment in the official PMI stood at 49.6 in December, slightly up from November’s 49.5.

China has also seen strong improvement in retail sales driven by firm demand for autos and communication equipment.

In the services sector, activity expanded for the 10th straight month, albeit at a somewhat slower clip. An indicator for construction activity rose at a faster pace.

(SD-Agencies)