China: Weaker PMI suggests decelerating manufacturing activity in January
February 1, 2011
The January Purchasing Managers' Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFPL) fell 1.0 percentage point over December to 52.9%. The drop surprised private sector analysts on the downside, who saw the index easing marginally to 53.5%. Nonetheless, the reading remains above the 50% threshold since March 2009. A reading above 50% indicates that the manufacturing sector is expanding, while a reading below 50% implies a contraction. The deterioration in the PMI was driven by the employment category, which dropped 2.5 percentage points to 49.0%, suggesting that labour market conditions began to contract in January. Meanwhile, the production component fell 2.2 percentage points to 55.3%, pointing to a deceleration in industrial activity. However, additional data for the following months are needed to clarify whether this drop represents a trend or simply reflects seasonal factors. Finally, the delivery index slid 0.1 percentage points to 49.5%, still below the 50% threshold.