Rate of growth slows across China's factories
By Abigail Townsend
Date: Monday 01 Feb 2021
(Sharecast News) - China's manufacturing sector continued to grow in January, but at a slower pace than expected, data showed on Monday.
According to the country's National Bureau of Statistics, the official purchasing managers' index was 51.3 in January. That is above the neutral 50.0 mark, indicating growth. But it was down on December's reading of 51.9 and narrowly missed forecasts for 51.6.
China's manufacturing sector enjoyed a strong second half in 2020 as it recovered from the impact of Covid-19.
But the country has seen a wave of fresh cases in recent weeks. Zhao Qinghe, senior statistician at the NBS, said: "The recent localised epidemic has had a certain impact on the production and operation of some enterprises, and the overall manufacturing industry has slowed. The period before and after the Lunar New Year is also traditionally an off-season for the country's manufacturing industry."
The official composite index, which includes both manufacturing and services, was 52.8, down from December's 55.1. The non-manufacturing PMI - which tracks the services sector - was 52.4, down on December's 55.7.
The publication of the official data was followed by the private Caixin China general manufacturing purchasing managers' index, released on Monday. It also eased, coming in at 51.5 in January compared to 53.0 in December.
Wang Zhe, senior economist at Caixin Insight, said: "The January reading was the lowest since June, despite marking the ninth consecutive month of expansion. That indicates the post-epidemic recovery continued but saw a marginal slowdown. The PMI dropped 3.4 points in the past two months, after reaching the highest level in a decade in November."
He said both supply and demand expanded but at a much slower pace, thanks to subdued overseas demand.
"This year, we should pay attention to the effectiveness of domestic epidemic prevention amid the ongoing pandemic, and look at how to bring new momentum to the Chinese economy as uncertainties over overseas demand continues," he said.
Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said of the official PMI data: "The output index pulled back, with the new orders gauge also showing deceleration. New export orders fared worse, amid renewed global anti-Covid restrictions, with the index falling to 50.2 from December's 51.3.
"The headline would have been worse if suppliers' delivery times hadn't lengthened, seen as a positive in the composition, but likely denoting renewed logistical problems."
Beamish added that the Caixin consensus "had looked on the strong side to us. The index has been sky high and due a correction."
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