China’s January PMIs Confirm Slowing Growth

Sauerkraut factory in Anshan City, Liaoning Province, Jan. 10, 2022. Photo credit: Xinhua/Yang Qing

THE FORECASTS SUCH as those from the IMF and World Bank that have trimmed their growth forecasts for China’s economy this year got some supporting evidence of slowing momentum from the official purchasing managers’ surveys released by the National Bureau of Statistics on January 30.

These show moderation in factory production and services in January. The official manufacturing purchasing managers’ index (PMI) fell to 50.1 from 50.3, barely above the 50-mark that delineates expansion and contraction. The non-manufacturing index, which covers the construction and services sectors, fell to 51.1 from 52.7.

Small businesses got off to the slowest start to the year as manufacturing output slipped and Covid-19 lockdowns curbed consumer spending.

The PMI for small companies dropped to 46, its ninth consecutive month below the 50-mark. The private Caixin Manufacturing Purchasing Managers’ Index, which focuses on smaller, export-oriented firms compared with the official manufacturing PMI, fell to 49.1, its lowest in almost two years.

The battle against the Omicron variant will likely further constrain Lunar New Year holiday travel and consumption. Residents of cities fighting Covid-19 outbreaks, like Beijing, Shanghai and Tianjin, have been urged not to travel.

More policy support in the coming months is likely, mainly through more fiscal spending. However, authorities will have to continue their delicate balancing act between stimulating slowing growth and keeping deleveraging going to reduce financial risk.

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