PMI for January portends further contraction

The Caixin/Markit Manufacturing Purchasing Managers’ Index for January dropped to 48.3, the lowest level since March 2016, a private survey showed on Friday.

The figure indicates a further slowdown in manufacturing. This is especially the case for small and medium-sized businesses amid the domestic economic transition and the ongoing China-US trade dispute.

Both official and private indexes remained below the 50-point level that separates growth from contraction for two consecutive months. These figures reflect the slowdown pressures on the economy. The economic growth rate in the first quarter may also see a further slowdown, said analysts.

In January, the new export order index ended a ninemonth decline and rose to the expansion range, the highest since April 2018.

Liu Xuezhi, a senior analyst of the Bank of Communications, said that the new export order index has rebounded. This rebound shows that after a pause in the China-US trade war, exports recovered.

China-US trade talks have made progress, with both sides not wanting further escalation. The possibility of positive results is greater. In this case, there may be a positive influence on the manufacturing sector, Liu said.

Affected by the slowdown in new orders and the decline in production demand, purchases by manufacturers in January fell for the first time in 20 months.

Companies cut jobs and became more efficient, keeping the employment index in the contraction range.

The figures mainly reflect the manufacturing sector’s problems resulting from the domestic transition. New growth drivers have not formed while traditional means of business expansion are saturated, Yuan Fuhua, director of the economic growth office of the Chinese Academy of Social Sciences, told the Global Times on Friday.