Q1 GDP rebound may slow due to new virus outbreaks

As China’s official manufacturing Purchasing Managers Index ( PMI) and private Caixin manufacturing PMI for January both dropped in January, some analysts said that China’s economic rebound may slow in the first quarter due to sporadic COVID- 19 outbreaks and strict virus containment measures. A revival of domestic consumption will come in the second and third quarters.

According to figures released on Monday, the Caixin manufacturing PMI remained in expansion territory of 51.5 in January, but it slowed to the lowest ever since July 2020. The national PMI, released by the National Bureau of Statistics on Sunday, stood at 51.3 – the 11th consecutive expansion but the lowest since September 2020.

“The official manufacturing PMI confirms a moderating sequential momentum in the first quarter, partly due to seasonal factors prior to Lunar New Year, in line with our slowing quarteron- quarter path for first- quarter GDP, though we expect 20 percent year- on- year growth from a low base last year,” said Chang Jian, chief China economist at Barclays Plc in Hong Kong, in a report shared with the Global Times.

The slide of the manufacturing PMI in January was within expectations as the country’s economic rebound at the end of last year was stronger than anticipated, Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times on Monday. Predicting China’s GDP growth in the first quarter will surpass 13 percent year- on- year, Tian said the true GDP volume will be lower than the last quarter of 2020.

What makes “the world’s factory” different this year is China will operate its most factories during the upcoming Chinese New Year holidays, part of the virus containment efforts to reduce population mobility.