Manufacturing at slowest growth pace in 8 months

China's manufacturing activity expanded in January at the slowest pace since last May while services activity grew at the fastest in four months.

China’s manufacturing activity expanded in January at the slowest pace since last May while services activity grew at the fastest in four months to reflect stable development in overall economic activity, the National Bureau of Statistics said yesterday.

The manufacturing Purchasing Managers’ Index, which measures vitality in the manufacturing sector, dipped last month to 51.3 from December’s 51.6.

The reading was below market expectations for 51.6 but remained above the 51 mark for the 16th consecutive month.

A reading above 50 indicates expansion, and below 50 contraction. The manufacturing PMI has been in positive territory for 18 straight months in a row.

The non-manufacturing PMI rose for the third consecutive month to reach 55.3 in January, up from December’s 55.

A general PMI, published for the first time to cover both manufacturing and services industries, was flat at 54.6, as data showed the December reading would have read the same.

The new index was introduced to better track the economy as the border between the manufacturing and services sectors has become more ambiguous.

While old indexes will remain, the new gauge will “provide a new perspective to monitor the macro-economy, and enrich and improve the current PMI system,” the bureau said, adding that it has undertaken more than two years of research and testing.

The mechanism in compiling the index is in line with global practices, it said. Its use will make economic activity in China more comparable on a global level.

“As of December, countries and regions including the eurozone, the United States, Britain, Germany and Japan have compiled and published such an index,” the bureau said.

Zhao Qinghe, a senior statistician of the bureau, said business activity of companies in China continues to maintain stable growth at a relatively fast rate, with the services sector outpacing manufacturing.

Growth in demand moderated as some industries approach the low season, but the consumer goods sector accelerated ahead of the Spring Festival, Zhao said.

January’s sub-index for production fell to 53.5 from December’s 54, and new orders fell to 52.6 from 53.4. Sub-indexes for raw material inventory, employment and suppliers’ delivery time were still lower than 50.

Businesses saw easing pressure from rising operating costs in January, and export growth softened as overseas demand fell after the Christmas and New Year holidays, Zhao added.

PMI for the consumer goods sector was 52.7, 0.3 points higher than December and 1.8 points higher than January 2017.

China’s economy is shifting to a consumption-led growth model to wean itself off reliance on exports and investment. Consumption contributed to 58.8 percent of economic growth last year.

Meanwhile, expansion in services industries was led by retail, air transport, broadcasting, Internet and financial services.

Economists at Bank of Communications, in a note, attributed the lower manufacturing PMI to seasonal reasons but warned about possible trade volatility as new export orders fell below 50 for the first time in 16 months.

The note said manufacturing activity and trade may remain cool this month due to the Spring Festival, whereas activity may rebound after March to show the continuous momentum in the domestic and external demand.