Bumpy new year for China’s factories
Print Edition
CHINA’S economy is having a bumpy start to the year with activity in manufacturing and the service sector deteriorating in January, figures released yesterday showed.
The official Purchasing Managers’ Index, a comprehensive gauge reflecting operational conditions in largely state-owned manufacturing companies, fell 0.3 points from December to 49.4 , according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
The demarcation line between expansion and contraction is set at 50.
The January figure represented another deterioration in manufacturing after a rebound in December, but as that rebound was still below 50, industrial activity has now been in contraction for six consecutive months.
Meanwhile, the official non-manufacturing PMI, a counterpart for the services sector, retreated to 53.5 last month from 54.4 in December.
Bureau analyst Zhao Qinghe said factors including the upcoming Spring Festival, cold weather, and the country’s strengthened efforts in tackling overcapacity were to blame for the weakening data.
“Market demand is usually not strong ahead of the Spring Festival,” Zhao said. “Also, some factories have taken the initiative of reducing production to respond to the country’s campaign to resolve excessive capacity and accelerate economic restructuring.”
The manufacturing PMI’s component indexes showed new orders fell to 49.5 last month, down from December’s 50.2. Production lost 0.8 points to 51.4, while the index measuring inventory was down 1.5 points to 44.6, or the third straight month of reduction.
In contrast to the worsening performance in state-owned industrial companies, their private and export-oriented counterparts showed a moderate improvement.
The Caixin China PMI, a similar indicator slanted toward private and export-oriented manufacturing companies, landed at 48.4 in January, up from 48.2 in December, according to Caixin magazine and research firm Markit.
“Recent macroeconomic indicators show the economy is still in the process of bottoming out and efforts to trim excessive capacity are just starting to show results,” said He Fan, chief economist at Caixin Insight Group.
“The pressure on economic growth remains intense in the light of continued global volatility, and the government needs to watch economic trends closely and make fine adjustments proactively to prevent a hard landing,” He said.
The latest activity figures also showed continued signs of weakness in manufacturing, with the growth of industrial production moderating again in December. Factories said their output expanded 5.9 percent in the month, down from the increase of 6.2 percent in November after a brief rebound.
The profits of China’s industrial companies contracted 2.3 percent from a year earlier in 2015, a sharp deceleration from the increase of 3.3 percent in 2014. In December alone, profits were down 4.7 percent to 816.7 billion yuan (US$124 billion), compared with a cut of 1.4 percent a month earlier.
The Producer Price Index, a factory-gate gauge of inflation, declined 5.9 percent from a year earlier last month.
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