China's Factory Outlook Eases Again, Services Slow Down - Bloomberg

Cabinet Manufacturing At Dicheng Technology Co. — Photographer: Qilai Shen/Bloomberg

An official gauge of China’s manufacturing output slipped for a second month in January, while activity in the services sector slowed to the lowest reading since March.

The official manufacturing purchasing managers’ index fell to 51.3 from 51.9 in December, according to data released Sunday by the National Bureau of Statistics.
The non-manufacturing gauge dropped to 52.4 from 55.7 in January. That was the biggest fall since February last year, when China locked down to contain Covid-19. Readings above 50 indicate expansion in output from the previous month.

China Slowdown

Pace of growth slowed in January, with services dropping the most

Source: National Bureau of Statistics

Key Insights

China’s recovery from the pandemic gathered pace toward the end of 2020, fueled by an export boom for medical and electronic goods.
Economists expected some weakness in the PMI ahead of the Lunar New Year holiday in February. Aside from a seasonal drop in production, strict travel restrictions and virus control measures following recent Covid-19 outbreaks in China mean many workers won’t make the annual trip back home, which will likely result in weaker spending on gifts and dining out.
“These measures will impair the recovery in the services sector, especially the hospitality industry,” economists at Nomura Holdings Inc. led by Lu Ting wrote in a report before the data were released. However, they “may provide a small boost to industrial production and construction in South China, as workers would remain at workplaces.”
Overall, the new control measures will drag on economic growth in the first quarter, they wrote.

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A sub-index of new export orders for factories fell to 50.2, while one for new orders was lower at 52.3
A sub-index of manufacturing employment declined to 48.4, while non-manufacturing employment slowed to 47.8

— With assistance by James Mayger, and Lin Zhu

(Updates with chart, economists comment and more details throughout.)

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