China’s January Caixin manufacturing PMI came in at 48.3 vs. 49.5 expected and 49.7 last, suggesting that the production remained subdued at the start of 2019.
On Thursday, the purchasing managers’ index (PMI) for China’s manufacturing sector arrived at 49.5 in Jan, up from 49.4 in Dec, the National Bureau of Statistics (NBS) reported.
Summary
“Latest survey data signalled subdued overall operating conditions in the Chinese manufacturing sector at the start of 2019. Production and total new work were both slightly down at the start of the year, despite a renewed increase in export orders. Relatively muted demand conditions underpinned the first fall in purchasing activity for 20 months, while firms also registered lower inventories of both purchased and finished items.
On a positive note, employment levels fell at the weakest rate for nine months, while confidence towards the business outlook was at its highest since May 2018.
The headline seasonally adjusted Purchasing Managers’ Indexâ„¢ (PMIâ„¢) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 48.3 at the start of 2019, down from 49.7 in December, to point to a continued softening in the health of China’s manufacturing sector. The latest PMI reading was the lowest since February 2016.”
Commenting on the China General Manufacturing PMIâ„¢ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
“The Caixin China General Manufacturing PMI fell further to 48.3 in January, the lowest since February 2016.”
“The subindex for new orders dipped further into contractionary territory, pointing to a moderate contraction in demand across the manufacturing sector. Yet the gauge for new export orders rose notably above the 50 level, the dividing line that separates contraction from expansion, reaching its highest point since March 2018, showing that companies’ export orders have obviously rebounded since the truce in the China-U.S. trade war.”
“The output subindex dropped, highlighting the drag effect of softer demand on production. The employment subindex continued to rise moderately despite staying in negative territory, which could be due to the effect of government policies to stabilize the job market. The measure for stocks of finished goods fell into contractionary territory, while the subindex for stocks of purchased items dropped further, suggesting that manufacturers tended to reduce their inventories. The subindex for suppliers’ delivery times returned to negative territory, indicating that pressure on capital turnover, though less than in the months before December, still existed.”
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