China Economy

A private survey showed China's manufacturing activity expanded in January

Key Points
  • A private survey showed China's manufacturing activity in January expanded at its slowest pace in five months, coming in at 51.1.
  • Analysts polled by Reuters had expected the private manufacturing PMI to come in at 51.3 for January.
  • PMI readings above 50 indicate expansion, while those below that level signal contraction.
This photo taken on January 30, 2020 shows workers producing disinfectant at a factory in Xiaogan in China's central Hubei province, to support the supply of medical materials during the virus outbreak in Hubei's city of Wuhan.
STR | AFP | Getty Images

A private survey showed China's manufacturing activity in January expanded at its slowest pace since August.

On Monday, Markit/Caixin said its manufacturing PMI came in at 51.1 for the month of January, said IHS Markit and Caixin in a press release. That's the slowest in five months.

Economists polled by Reuters had expected the Markit/Caixin manufacturing PMI to come in at 51.3.

The Markit/Caixin manufacturing PMI — a measure of factory activity — was 51.5 in December.

PMI readings above 50 indicate expansion, while those below that level signal contraction.

Slow demand dragged on manufacturing activity, with total new orders weakening to a level not seen since September 2019, said Zhengsheng Zhong, director of macroeconomic analysis at Caixin subsidiary CEBM Group.

On Friday, China's National Bureau of Statistics said the country's official manufacturing PMI came in at 50.0 for the month of January — an indication of stalled activity.

The bureau said that the impact of the ongoing coronavirus outbreak was not fully reflected in the survey, which was conducted before Jan. 20.

With most responses to the Markit/Caixin survey likely submitted early before the Lunar New Year holidays and before widespread public awareness about the scale of the outbreak, the results would not have reflected the extent of the economic damage from the coronavirus, said Capital Economics.

"Since then, it's become clear that manufacturing activity is facing major near-term headwinds," wrote economists Julian Evans-Pritchard and Martin Lynge Rasmussen in a note on Monday.

"Domestic demand has taken a big hit as consumers are staying home and likely delaying non-essential purchases," they added.

Lunar New Year holidays have also been prolonged in many cities and provinces in attempts to contain the virus.

"This means that factories and ports will be churning out a much lower output than usual, if anything at all," they added. Transport disruptions will also make it difficult for migrant workers to return from holidays once businesses are officially allowed to reopen, they said.

CEBM's Zhong said China's economy will be impacted by the coronavirus epidemic in the near term.

Before the outbreak, China's economy had already been affected by the country's long-drawn trade war with the U.S.

The official PMI survey typically polls a large proportion of big businesses and state-owned enterprises while the private manufacturing PMI survey by Markit/Caixin features a bigger mix of small- and medium-sized firms.