China’s Official PMIs Slow but Still in Line with the Ongoing Recovery

Over the weekend China released a pair of PMI reports that could offer investors some insight into the state of its economy and shed a little light on the conditions of the global economy. China’s factory recovery slowed in January as COVID-19 returned and growth in China’s services sector slowed in January.

In January, mainland China reported more than 2,000 local cases of the coronavirus. While the number was small compared to other countries, authorities were concerned about transmission risks during the Lunar New Year travel rush – the world’s biggest annual human migration spanning 40 days from January to February.

During the month several large cities were locked down with tens of millions tested for COVID-19, interrupting factory activity and weighing on the services sector, including logistics and transportation.

The new coronavirus outbreak, mostly in the north, is expected to be a temporary restraining factor while China’s vast industrial sector continues to find strength in resilient export demand.

China’s Factory Recovery Slows in January as COViD-19 Returns

China’s factory activity grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, but still in line with the ongoing recovery in the world’s second-largest economy.

The official manufacturing Purchasing Manager’s Index (PMI) fell to 51.3 in January from 51.9 in December, the National Bureau of Statistics said in a statement on Sunday. It remained above the 50-point mark that separates growth from contraction on a monthly basis, but was below the 51.6 expected in a Reuters poll of analyst forecasts.

Growth in China’s Services Sector Slows in January – Official PMI

Activity in China’s services sector expanded at a slower pace in January, official data showed on Sunday, weighed by a flare-up in new coronavirus outbreaks.

The official non-manufacturing Purchasing Managers’ Index (PMI) slipped to 52.4 from 55.7 in December, data from the National Bureau of Statistics (NBS) showed.

Though slower than manufacturing, China’s services sector, which includes many smaller and privately owned companies, has gained solid growth thanks to strong demand.

In other news, the official January Composite PMI, which includes both manufacturing and services activity, fell to 52.8 from December’s 55.1.

The Official Statistic Bureau Response

“The recent localized epidemic has had a certain impact on the production and operation of some enterprises, and the overall expansion of the manufacturing industry has slowed,” said Zhao Qinghe, an official at the statistics bureau.

“The period before and after the Lunar New Year is also traditionally an off-season for the country’s manufacturing industry,” Zhao said in an accompanying statement.