Asia Economy

China Factory Activity Eases in January, Misses Forecast

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China's official purchasing managers' index (PMI) eased to 50.4 in January, the National Bureau of Statistics said on Friday, missing market expectations and underscoring that the economy is making only a mild recovery from its weakest year since 1999.

A Reuters poll had forecast the PMI to rise to a nine-month high of 50.9. It stood at 50.6 in December.

The 50-point level demarcates accelerating activity from contraction versus the previous month.

The official PMI has been above 50 each month since August 2012, though its failure to break above 51 indicates that the economic expansion it signals is only moderate.

Ting Lu, chief China economist with Bank of America/Merrill Lynch said the volatility of the index around the Lunar New Year holidays - which fell in January last year and are in February this - distort the readings.

"We believe the Chinese economy and its related asset markets will remain in a sweet spot in the near-term," he wrote in a note to clients.

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Signs of a strengthening recovery were evident in the PMI's new orders sub-index, which inched up to a nine-month high of 51.6. The quantity of purchases sub-index also hit a nine-month peak, with its rise to 53.2 another indication that the destocking process that had dragged on China's industrial output through 2012 was over.

The NBS said that the sample size for the survey had been increased to 3,000 firms from the previous 820 across 31 industries from Jan. 1, without explaining the change. It did not say if historical data would be revised with the changes.

It gave no assessment of how the change might have affected the index readings.

China's official PMI follows on from the preliminary findings of a private sector survey sponsored by HSBC a week ago, which rose to a two-year high of 51.9 in January.

The HSBC flash PMI, the earliest preview of China's economic health in 2013, offered the latest indication that the world's second-largest economy is steadily recovering from a near two-year cool-down.

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Separately, a private survey of manufacturers painted a much rosier picture.

The final HSBC purchasing managers' index (PMI) rose to 52.3 in January, the highest since January 2011 and a shade above last week's flash, or preliminary, reading of 51.9.