Sun, Feb 02, 2014 - Page 6 News List

China PMI slips to five-month low in January

‘FESTIVAL EFFECT’:All major components of the manufacturing index, from new orders to production, declined, indicating downward pressure on China’s economy


China’s official gauge of its manufacturing sector slipped to a five-month low last month, the government announced yesterday, confirming a slowdown in factory activity in the world’s second-largest economy.

The monthly purchasing managers’ index (PMI) declined to 50.5 last month after recording 51.0 in December and 51.4 in November, according to the government’s National Bureau of Statistics and the China Federation of Logistics and Purchasing.

Any figure above the 50 mark indicates expansion of manufacturing activity while anything below that signals contraction.

The decline in PMI was mainly due to the approach of the Lunar New Year holiday, Zhao Qinghe (趙清河), a statistician at the statistics bureau, said in a statement yesterday.

China’s operating environment for production will improve this year, Zhao said.

All major components of the PMI, from new orders to production, declined, indicating downward pressure on the economy, state news agency Xinhua reported.

The decline “could be largely due to the festival effect,” ANZ bank said in a note, referring to the annual Lunar New Year holiday when millions of migrant workers down tools and return to their homes. The Year of the Horse began on Friday, but the widespread closure of factories and workshops started several days earlier.

HSBC bank announced on Thursday that China’s manufacturing sector shrank last month for the first time in six months, with the PMI index recording 49.5, placing it in contraction territory.

Qu Hongbin (屈宏斌), HSBC bank’s economist in Hong Kong, described it as “a soft start to China’s manufacturing sectors this year, partly due to weaker new export orders and slower domestic business activities during January.”

China recorded annual GDP growth of 7.7 percent last year, the government said earlier last month, indicating it maintained its slowest expansion in more than a decade.

“Growth may continue to slow in the next couple of quarters due to generally tighter credit conditions, amid government efforts to contain local government debt and regulate shadow banking,” said Ding Shuang (丁爽), senior China economist at Citigroup Inc in Hong Kong, who previously worked at the IMF.

The latest PMI data suggest that a “gradual deceleration of economic activity continued at the beginning of the year,” Ding said.

Additional reporting by Bloomberg

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