China’s Factory Outlook Eases Again With Recovery Still Intact

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An official gauge of China’s manufacturing output slipped for a second month in January, while activity in the services sector slowed to the lowest reading since March 2020.

  • The official manufacturing purchasing managers’ index fell to 51.3 from 51.9 in December, according to data released by the National Bureau of Statistics Sunday. That compares to the 51.6 median estimate in a Bloomberg survey of economists
  • The non-manufacturing gauge dropped to 52.4, lower than the median forecast of 55. Readings above 50 indicate expansion in output

Key Insights

  • China’s recovery from the pandemic gathered pace toward the end of 2020, fueled by an export boom for medical and electronic goods. That momentum likely continued in January, a set ofearly indicators tracked by Bloomberg show
  • Economists expect some weakness in the PMIs ahead of the Lunar New Year holiday in February though. Aside from a seasonal drop in production, strict travel restrictions and virus control measures following recent outbreaks in China mean many workers won’t make the annual trip back home, which will likely result in weaker spending on gifts and eating out
  • Export demand is expected to remain strong given the resurgence in infections globally, Morgan Stanley economists wrote in a note

— With assistance by James Mayger, and Lin Zhu

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