China’s manufacturing sector continued its expansion for the third consecutive month in January, according to a private-sector survey released on Thursday. This growth was supported by the first upturn in new export orders in seven months.
The Caixin China Manufacturing Purchasing Managers’ Index (PMI) registered at 50.8 in January, maintaining the same level as December. Economists had anticipated a slight dip to 50.6, according to a Reuters poll. The 50-point mark separates expansion from contraction.
In contrast, official data from China’s National Bureau of Statistics, released on Wednesday, indicated a fourth consecutive monthly contraction in the country’s manufacturing PMI, with a reading of 49.2 in January compared to 49 in December.
Wang Zhe, senior economist at Caixin Insight Group, highlighted the uptick in overseas demand as a contributing factor to the expansion. “Overseas demand picked up slightly with new export orders expanding for the first time in seven months,” Wang noted. He also mentioned that surveyed companies reported significant output increases in investment goods, while improvements in external demand were primarily observed in intermediate goods.
The discrepancy between the two surveys has been attributed to differences in sample sizes and compositions. The Caixin PMI survey includes approximately 650 private and state-owned manufacturers, which are typically more export-oriented and located in China’s coastal regions, while the official PMI surveys 3,200 companies across the country.
Despite variations in sampling, both surveys indicated consistent trends in certain areas. Employment in China’s manufacturing sector continued to decline according to both surveys, with companies prioritizing cost reduction and efficiency improvement over hiring. Wang emphasized that the labor market contracted for the 10th time in the past 11 months, albeit less severely than in previous months.
Moreover, China has been grappling with deflationary pressures for the past nine months, with producer prices declining for over a year. Wang highlighted the persistence of weak price levels, noting limited increases in input costs due to slight upticks in raw material prices. However, output prices faced additional challenges due to intensified market competition, pushing the gauge into contractionary territory.
In summary, while China’s manufacturing sector exhibited growth according to the Caixin PMI, discrepancies with official data underscore the uneven nature of the country’s economic recovery, emphasizing the continued importance of supportive policies.
