China’s PMI recovered in January
2023.01.31 02:49
China’s PMI recovered in January
By Ray Johnson
Budrigannews.com – In January, China’s economic activity returned to growth after pandemic controls were abandoned, resulting in a greater than anticipated spread of COVID-19 infections throughout the country.
The first comprehensive data to demonstrate how quickly China is recovering from its COVID reopening wave show that domestic orders and consumption drove output higher. However, analysts cautioned that the economy faced persistently weak external demand.
The National Bureau of Statistics (NBS) reported on Tuesday that the official purchasing managers’ index (PMI), which measures manufacturing activity, increased to 50.1 in January from 47.0 in December. A Reuters poll of economists had predicted a PMI of 48.0. The fact that the score was higher than 50.0 suggested growth.
Economists anticipated a more decisive rebound in non-manufacturing activity, which was helped by a seasonal increase in spending for the Lunar New Year holiday. This index, which includes services, increased from 41.6 in December to 54.4.
The economy had previously been shrinking since September, as indicated by both indexes.
Bruce Pang, chief economist at Jones Lang Lasalle (NYSE:), stated, “The PMI data showed that confidence in production, operation, and the state of the market has improved significantly.” wrote in a note, citing the sub-index level of just 46.1 for new export orders as cause for concern.
Demand for China’s exports has decreased, falling 9.9% from a year ago, as foreign economies have weakened as a result of rising interest rates.
Dan Wang, chief economist at Bank China, stated that the rebound in activity in January “is a bit unexpected as everyone is still quite cautious.” Because workers typically have two weeks off, it is difficult for the PMI to pick up in the same month as Chinese New Year.”
She added:
“All the other real indicators got worse, like employment, inventory, and delivery times.” “Export orders went down, so that means domestic orders must have gone way up.”
However, the speed of activity recovery corresponds to what is becoming increasingly understood to have been an infection wave that arrived quickly, disrupting work and consumer demand, and then quickly dissipated, requiring factory managers to restart production and retailers to re-establish customer service.
China’s chief epidemiologist stated that prior to the start of the Lunar New Year celebrations, eighty percent of the population had already been infected with COVID-19.
Nevertheless, the January PMI report has been bolstered by robust holiday spending. Consumption for Lunar New Year had already been reported to be 12.2% higher than during the holiday season of last year, and holiday trips within China for the same period increased by 74% as people went out to celebrate for the first time in three years without being restricted by COVID-19.
China eased pandemic controls in November and nearly eliminated them in early December after nearly three years of a zero-COVID strategy.
For the holiday season, factories attempted to make up ground lost to the disruptions of last year. For a major British retailer, Kevin Whyte sources home goods in China. He told Reuters that his partner factory in China had offered bonuses to employees to shorten their New Year’s vacations.
On Saturday, the cabinet said it would help importers and encourage a recovery in consumption, which is the main economic driver.
The IMF also discussed China’s economic recovery speed on Tuesday. It stated that the increased mobility would only last a short time.
The International Monetary Fund (IMF) raised its forecast for gross domestic product growth in 2023 from 4.4% in October to 5.3%, but warned that it would likely fall again to 4.5 percent in 2024.
From 42.6 in December, the official composite PMI, which includes manufacturing and services, increased to 52.9.
On February 1, the private sector Caixin manufacturing PMI, which focuses more on coastal regions and small businesses, will be released. According to Reuters polls of analysts, a headline reading of 49.5 is anticipated, up from 49.0 in December.
