Production slows amid tightening
By Wang Yanlin |
February 2, 2011, Wednesday
|
Print Edition
Print Edition
CHINESE manufacturing cooled down further in January amid tightening policies, surging inflation and seasonal changes, with analysts saying the moderation may continue.
The official Purchasing Managers' Index, a comprehensive gauge of industrial activities across the country, lost 1 percentage point from a month earlier to 52.9 percent in January, the China Federation of Logistics and Purchasing said yesterday.
It was the second cutback after the index reduced to 53.9 percent in December from November's 55.2 percent.
A reading above 50 percent indicates expansion, and the index has been above that for 23 months in a row, indicating a relatively stable recovery from the global financial crisis.
"The official manufacturing PMI moderated more than expected in January," said Chang Jian, an economist at Barclays Capital. "The moderation and part of the downside surprise could be attributable to seasonal weakness, as cold weather and fewer working days this year disrupted production."
The 2011 Chinese Lunar New Year holiday began today, about two weeks earlier than last year, and many workers returned to their hometown early to celebrate the occasion.
Tightening policies to curb inflation and rising input prices also made it harder for manufacturers to bolster production. Zhang Liqun, a federation analyst, said the slipping index showed an unstable policy environment and it is very likely the gauge will continue to decrease in the next few months.
"Industrial companies have to deal with surging prices and less loan quota when China adopted a prudent monetary policy," Zhang said. "The policy and economic outlook is rather obscure at the moment."
China has lifted benchmark interest rates twice since October to tame inflation which rose to 4.6 percent in December. With surging food prices recurring, analysts predict consumer price index in January may rebound to more than 5 percent.
In contrast to the official index, the HSBC China Manufacturing Purchasing Managers' Index held relatively steady last month. It posted 54.5 in January, up slightly from 54.4 in December, which indicated better conditions in private companies.
The official PMI is weighted heavily toward big domestic companies, while the HSBC survey is slanted more toward privately owned and export-oriented firms.
The HSBC survey found new business growth quickened in January, new export businesses increased modestly but cost inflation remained strong.
"China kick-started the new year with an upbeat manufacturing PMI reading following the stronger-than-expected economic performance in the fourth quarter of last year," said Qu Hongbin, chief economist at HSBC. "The growth momentum leaves room for the central government to fully focus on checking liquidity and inflation pressure."
The official Purchasing Managers' Index, a comprehensive gauge of industrial activities across the country, lost 1 percentage point from a month earlier to 52.9 percent in January, the China Federation of Logistics and Purchasing said yesterday.
It was the second cutback after the index reduced to 53.9 percent in December from November's 55.2 percent.
A reading above 50 percent indicates expansion, and the index has been above that for 23 months in a row, indicating a relatively stable recovery from the global financial crisis.
"The official manufacturing PMI moderated more than expected in January," said Chang Jian, an economist at Barclays Capital. "The moderation and part of the downside surprise could be attributable to seasonal weakness, as cold weather and fewer working days this year disrupted production."
The 2011 Chinese Lunar New Year holiday began today, about two weeks earlier than last year, and many workers returned to their hometown early to celebrate the occasion.
Tightening policies to curb inflation and rising input prices also made it harder for manufacturers to bolster production. Zhang Liqun, a federation analyst, said the slipping index showed an unstable policy environment and it is very likely the gauge will continue to decrease in the next few months.
"Industrial companies have to deal with surging prices and less loan quota when China adopted a prudent monetary policy," Zhang said. "The policy and economic outlook is rather obscure at the moment."
China has lifted benchmark interest rates twice since October to tame inflation which rose to 4.6 percent in December. With surging food prices recurring, analysts predict consumer price index in January may rebound to more than 5 percent.
In contrast to the official index, the HSBC China Manufacturing Purchasing Managers' Index held relatively steady last month. It posted 54.5 in January, up slightly from 54.4 in December, which indicated better conditions in private companies.
The official PMI is weighted heavily toward big domestic companies, while the HSBC survey is slanted more toward privately owned and export-oriented firms.
The HSBC survey found new business growth quickened in January, new export businesses increased modestly but cost inflation remained strong.
"China kick-started the new year with an upbeat manufacturing PMI reading following the stronger-than-expected economic performance in the fourth quarter of last year," said Qu Hongbin, chief economist at HSBC. "The growth momentum leaves room for the central government to fully focus on checking liquidity and inflation pressure."
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