China PMI January 2020


China: Manufacturing PMI falls in January

January 30, 2020

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 December’s 50.2% to 50.0% in January. The print was in line with the result expected by market analysts. Therefore, the index sits in the 50.0% threshold that separates contraction from expansion in the manufacturing sector.

January’s print reflected lower readings for production, suppliers’ delivery times and purchasing activity. New orders and job creation, however, improved in the same month. Export orders dipped below the 50.0% threshold in January following a short-lived increase in December.

Analysts believe that the slight moderation in January could reflect the outbreak of the coronavirus. That said, they expect more noticeable deterioration in the coming month. Against this backdrop, Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, add that:

“We expect a big plunge for both manufacturing and services PMI in February to a range of 40-45 due to the coronavirus outbreak. The services PMI could be hit harder than the manufacturing PMI, as a number of service sectors have come to a grinding halt since 23 January. We expect real GDP growth in Q1 2020 to drop materially from the 6.0% pace achieved in Q4 2019, on a scale perhaps bigger than the decline of 2pp registered in Q2 from Q1 2003 during the SARS outbreak, as: (1) the coronavirus itself may prove more serious than SARS regarding the number infected; and 2) the special timing of the coronavirus outbreak around the LNY holiday could be more disruptive to China’s economy.”

Iris Pang, Greater China economist at ING, comments that:

“Production is expected to be affected by the coronavirus but it is very hard to estimate the extent of this. Uncertainty about the impact on manufacturing activity is very high and labour-intensive factories are particularly at risk. Some production lines will be affected, but it is difficult to estimate the damage across various industries.”

FocusEconomics Consensus Forecast participants expect industrial production to rise 5.2% in 2020, which is unchanged from the previous month’s forecast. In 2021, the panel sees industrial production growth at 5.1%.

Author: Ricard Torné, Lead Economist

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China PMI Chart

China PMI January 20 20

Note: Purchasing Managers’ Index. Readings above 50% indicate an expansion in the manufacturing sector while readings below 50% indicate a contraction.
Source: National Bureau of Statistics of China (NBS) and the China Federation of Logistics and Purchasing (CFLP).

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