The sluggishness continues.

Activity in China’s manufacturing sector contracted for a sixth straight month in January, and missed market expectations by falling at its fastest pace in almost three-and-a-half years.

Chinese factory scene
Chinese factory scene

On Monday, the official Purchasing Managers’ Index (PMI) for January was reported at 49.4, below the 50-point mark that separates growth from contraction on a monthly basis.

It was down from December’s reading of 49.7 and fell short of the 49.6 expected by analysts polled by Reuters. It’s the weakest index reading since August 2012.

The privately run Caixin Purchasing Managers’ Index also showed manufacturing slowing. Its January reading of 48.4 was the 11th straight month that manufacturing had slowed, but the contraction wasn’t as severe as the 48.2 registered in December.

Data for the categories used to calculate the index show that both output and employment conditions declined faster in January than in December.

The Caixin report said total new manufacturing orders continued to shrink, but at the lowest rate in seven months. Companies cut back on purchasing activities due to lower production requirements.

Sales prices fell in January for the 18th month in a row.

“Recent macroeconomic indicators show the economy is still in the process of bottoming out and efforts to trim excess capacity are just starting to show results,” said Dr. He Fan, chief economist at Caixin Insight Group. “The pressure on economic growth remains intense in light of continued global volatility. The government needs to watch economic trends closely and proactively make fine adjustments to prevent a hard landing.

“It also needs to push ahead with existing reform measures to strengthen market confidence and to signal its intentions clearly,” he said.

China’s services sector also reported slowing activity in January, with the Monday release of the country’s official non-manufacturing Purchasing Managers’ Index (PMI) survey. However, the services sector did not break the 50-point mark that separates growth from contraction on a monthly basis.

For January, the official non-manufacturing PMI came in at 53.5, down from the previous month’s reading of 54.4.

Leave a comment