Factories in contraction for 1st time since 2012
Print Edition
CHINA’S manufacturing sector contracted for the first time in more than two years in January and the service sector also grew at a slower pace, the National Bureau of Statistics said yesterday.
The official Purchasing Managers’ Index, a gauge of the vitality in the manufacturing sector weighted toward state-owned enterprises, fell to 49.8 last month, down from 50.1 in December, according to the bureau and the China Federation of Logistics and Purchasing.
The reading was below the 50 mark that separates contraction from expansion for the first time since October 2012.
Zhao Qinghe, a bureau researcher, said seasonal factors, lower commodity prices and weak demand at both home and abroad were among the reasons for the decline. January is a traditionally weak season for industrial activity due to the New Year’s Day holiday and the upcoming Chinese New Year. But this year, seasonal factors could be seen as favorable.
Zhou Hao, an economis at Australia & New Zealand Banking Group Ltd, said: “The Chinese New Year falls in February this year, while it was in late January last year. Past experience suggests that there could be significant front loading effect before Chinese New Year, which would provide a short-term impetus to the manufacturing sector. The surprising failure to materialize the impetus indicates really weak performance.”
Component indexes showed production declined to 51.7, 0.5 points less than in December. New orders lost 0.2 points to 50.2, and employment also cut 0.2 points to 47.9.
Meanwhile, the official non-manufacturing PMI, a counterpart for the service sector, was 53.7 in January, down from 54.1 a month earlier. The sector, which includes construction, software, aviation, railway and real estate, has grown rapidly in the past few years.
With faster infrastructure construction, the services employment index rose 3.6 points to 53.1.
Zhou said China is likely to lower its growth target to 7 percent this year, from last year’s 7.5 percent. “We found that almost all the provinces have lowered the growth target for this year at their local people’s congress, reflecting a commitment to push forward structural reforms,” Zhou said.
China’s GDP grew 7.4 percent from a year earlier in 2014, the slowest pace in 24 years.
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