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China's Factory Outlook Eases Again, Services Slow Down - Bloomberg

Cabinet Manufacturing At Dicheng Technology Co.

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.

  • The official manufacturing purchasing managers’ index fell to 51.3 from 51.9 in December, according to data released Sunday by the National Bureau of Statistics.
  • The non-manufacturing gauge dropped to 52.4 from 55.7 in January. That was the biggest fall since February last year, when China locked down to contain Covid-19. Readings above 50 indicate expansion in output from the previous month.

China Slowdown

Pace of growth slowed in January, with services dropping the most

Source: National Bureau of Statistics

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.
  • Economists expected some weakness in the PMI ahead of the Lunar New Year holiday in February. Aside from a seasonal drop in production, strict travel restrictions and virus control measures following recent Covid-19 outbreaks in China mean many workers won’t make the annual trip back home, which will likely result in weaker spending on gifts and dining out.
  • “These measures will impair the recovery in the services sector, especially the hospitality industry,” economists at Nomura Holdings Inc. led by Lu Ting wrote in a report before the data were released. However, they “may provide a small boost to industrial production and construction in South China, as workers would remain at workplaces.”
  • Overall, the new control measures will drag on economic growth in the first quarter, they wrote.

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  • A sub-index of new export orders for factories fell to 50.2, while one for new orders was lower at 52.3
  • A sub-index of manufacturing employment declined to 48.4, while non-manufacturing employment slowed to 47.8

— With assistance by James Mayger, and Lin Zhu

(Updates with chart, economists comment and more details throughout.)

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