China: Manufacturing and non-manufacturing PMIs decline in January
The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from 51.9% in December to 51.3% in January, below the 51.6% expected by market analysts. As a result, the index remained above the 50.0% threshold that separates expansion from contraction in the manufacturing sector. The reading was driven by slower growth in output, new orders and new exports, likely as restrictions tightened abroad and some localized restrictions were introduced domestically amid spiking Covid-19 cases. The headline reading masked differences among firms: while large- and medium-sized enterprises continued to expand, the PMI for smaller companies indicated worsening operating conditions.
Looking at the non-manufacturing sector, the PMI stood at 52.4%, down from 55.7% in December and indicating a notable slowdown in the services sector.
Regarding January’s reading and the outlook for the rest of the year, Ho Woei Chen, economist at United Overseas Bank, commented:
“After repeated outperformance in the Chinese economic indicators, the broad pullback in the survey readings is a timely reminder that the threat from pandemic resurgence remains real, and could worsen with the upcoming Lunar New Year holidays. However, with the situation remaining controlled in China and seasonally weaker months during the Lunar New Year period, these factors are likely to be transient and China is still on track for stronger growth this year due to the successful vaccine rollout to achieve herd immunity and overcome the pandemic.”