China’s January manufacturing growth falters

Growth in China’s manufacturing sector slowed more than expected in January to an eight month low in the face of a cooling property market and tighter pollution rules that have curtailed factory output.

The figures, which give global investors their first look at business conditions in China at the start of 2018, reinforced the view that the economy is beginning to gradually lose steam after growing a better-thanexpected 6.9% in 2017.

The official purchasing managers index (PMI) released on Wednesday edged lower to 51.3 in January, compared with 51.6 in December. But it remained above the 50-point mark that separates growth from contraction on a monthly basis. Analysts surveyed by Reuters had forecast the headline number would ease slightly to 51.5.

Indices for output, total new orders and imports all showed more moderate expansion in January while export orders declined marginally. The new export order index dropped to 49.5, 2.4 percentage point lower than December’s reading.

However, the overall factory reading still appeared relatively solid, marking the 18th straight month of expansion and reinforcing expectations that any slowdown in the economy would be gradual. Economists polled by Reuters are pencilling in growth of 6.5% in 2018.

A separate PMI on the steel industry rose to 50.9 in January from 50.2 in December.

In another sign of broader economic resilience, a sister survey showed activity in China’s service sector accelerated to a four-month high in January.

The official nonmanufacturing PMI rose to 55.3 from 55 in December. The services sector accounts for over half of China’s economy, with rising wages giving consumers more spending power.

A buoyant services industry is welcome news for policy makers who are counting on growth in services and consumption to rebalance their economic growth model from the heavy reliance on investment and exports.

Boosted by government infrastructure spending, a resilient property market and unexpected strength in exports, China’s manufacturing and industrial firms were a major driver behind the solid economic growth in 2017.

But analysts said that increasing trade frictions with the US could cloud the outlook for exporters in the world’s second-largest economy.

US President Donald Trump slapped steep tariffs on imported washing machines and solar panels last week. China is the world’s biggest solar panel producer.

A slowing property market is also likely to dent China’s industrial activity in 2018, dampening demand for building materials from glass to steel.

Property investment growth in December moderated to 2.4% from a year earlier, the lowest since July 2016.