China Manufacturing PMI Slides to 51.0 in January: Caixin Survey
(Beijing) – Manufacturing activity in China expanded at a slower pace in January on weakened growth in domestic demand, even though new exports increased at the strongest pace in more than two years, an industry survey sponsored by Caixin showed Friday.
The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which is closely watched by investors as one of the first available indicators every month that reflects the strength of the Chinese economy, stood at 51.0 last month, down from 51.9 in December.
The survey is based on data provided by more than 500 factories and mines across the country. A reading above 50 indicates expansion, while anything below that points to contraction.
The official manufacturing PMI, released by the National Bureau of Statistics on Wednesday, was 51.3 in January, down marginally from 51.4 in December, on slower growth in production and demand in the run up to the Spring Festival holiday week, which started on January 27.
Foreign demand apparently improved markedly as new export business rose at its fastest pace since September 2014. But overall new orders grew only moderately and its expansion decelerated from that seen in December, the Caixin survey showed.
The weaker demand at the start of 2017 weighed on production, with output picking up at its slowest speed since last September, while the rate of job loss in the sector hit the highest in three months.
“The Chinese economy maintained stable growth in January. But the sub-indices showed that the current growth momentum may be hard to sustain. We must remain wary of downward pressures on the economy this year,” said Zhong Zhengsheng, director of Macroeconomic Analysis at CEBM Group, a subsidiary of Caixin Insight Group.
He noted that inventory of purchases and finished goods both slid into contraction territory, adding that Chinese manufacturers “appear to have become rather reluctant to restock”.
Inflation remained under pressure to rise further as input costs and output charges both rose sharply in January, according to the survey.
The central bank last week raised interest rates on some medium-term lending facilities (MLFs), which are applied when commercial and policy banks borrow from the People’s Bank of China using securities as collateral.
The move came after the Chinese economy grew at a faster-than expected rate of 6.8% in the fourth quarter of 2016 and has been seen by analysts as a signal for monetary tightening aimed at curbing debt-fuelled risky investment and supporting the yuan’s value.
It was the first time the central bank has hiked MLF rates since it created the tool in September 2014 to manage medium-term liquidity in the banking system.
The last interest rate increase was in July 2011, when the central bank raised both the benchmark one-year lending and deposit rates by 25 percentage points.
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