Industrial activity may be in contraction
Print Edition
China’s manufacturing activity may have contracted for the first time in six months in January, pointing to a weak start for the economy in a year that China expects to accelerate reform, a preliminary survey showed yesterday.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of the industrial sector’s vitality, dropped to 49.6 in January from December’s final reading of 50.5, according to HSBC Holdings plc and research firm Markit.
A reading below 50 indicates contraction, and the latest figure indicated the fourth straight month of decline.
Qu Hongbin, chief economist for China at HSBC, said it was mainly dragged by cooling domestic demand.
“This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth,” Qu said.
Chang Jian, an economist at Barclays, said the index fell more than expected.
“Even taking seasonal factors into consideration, we think the reading was lower than expected,” Chang said.
An earlier holiday to celebrate the Lunar New Year this year may lead to a drop in manufacturing activity.
Components indexes showed that output eased slightly to 51.3 in January from 51.4 a month earlier. New orders fell by 1.8 points to 49.8, while new export orders slowed further to 49 from 49.1.
Zhu Haibin, chief economist for China at JPMorgan, said the drops reinforced the trend of softening growth momentum since last year’s final quarter. “Looking ahead, we look for relative stable consumption growth, moderate improvement in exports,” Zhu said.
“But the good news will be more than offset by slowdown in fixed investment, which can be attributed to lingering manufacturing overcapacity, tighter local government financing conditions and a slowing in the housing market,” Zhu added.
China’s economy has shown signs of weakening performance in the past few months with slowing growth in industrial production, fixed-asset investment and retail sales.
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