Manufacturing activity among China’s private and export-oriented companies contracted for the first time in seven months in December as a result of weaker domestic demand, a survey showed yesterday.

The HSBC Purchasing Managers’ Index, an indicator of operating conditions in the industrial sector, with a weighting toward private and export-oriented firms, fell to 49.6 in the month, from 50 in November.

The sub-50 reading was the first since May.

Qu Hongbin, chief economist for China at HSBC, said despite the PMI reading being better than expected, it still pointed to weakness in domestic demand and falling prices.

“The data confirmed the further weakening in the manufacturing sector. The soft economic activity and stronger disinflationary pressures warrant further monetary easing in the coming months,” he said.

Component indexes showed that new orders contracted for the first time since April, and that the decline was largely driven by weak domestic demand as new export orders rose for an eighth straight month.

Due to lower new business, manufacturers cut production for a second month in December and employment also fell, for the 14th straight month.

China’s economy grew 7.3 percent in the third quarter, its slowest in more than five years.

To bolster growth, the central bank in November lowered its benchmark interest rates for the first time in more than two years.

Economists, however, have continued to call for more accommodative policies to cushion a sharp economic slowdown.

The National Bureau of Statistics is set to release the official PMI for December today, which is weighted more toward large state-owned manufacturers. In November, the official PMI was 50.3.