China Factory Activity Declines in January amid COVID Outbreaks

The Purchasing Managers Index of the second-largest economy in the world fell to 50.1, just below the 50-point threshold that separates growth and contraction.

China Factory Activity Declines in January amid COVID Outbreaks

Official figures on Sunday showed that China's factory activity declined in January. However, it was slightly higher than expected as businesses battled with coronavirus outbreaks and sporadic disruptions.

The index of manufacturing activity, the Purchasing Managers Index, fell to 50.1, just below the 50-point threshold that separates growth and contraction.

Data from the National Bureau of Statistics (NBS), shows a slight decline from last month's reading of 50.3, when activity was buoyed in part by a decrease in commodity prices.

Zhao Qinghe, a NBS statistician, stated that China faced a difficult and severe economic environment as well as scattered outbreaks. "China's economy continued its recovery and development, although growth levels slightly declined."

Contrast the NBS reading with a private survey of small manufacturers, which dropped by 1.8 points at 49.1.

Pinpoint Asset Management's chief economist Zhiwei Zhiwei said that the slowdown was particularly bad for small businesses.

After a seven-month decline in the NBS numbers, they have been in growth territory ever since November. This is partly due to high raw material prices and power shortages.

Two months ago, the reading was below 50. This was due to the power crisis that impacted business operations.

The index of non-manufacturing activity was 51.1 in January. This is a decrease of 1.6 points over the previous month.

This was partly due to a slower recovery in the services sector, and a seasonal slowdown of construction.

Analysts warn that China's economy will continue to be affected by domestic coronavirus epidemics. Sporadic outbreaks can affect consumer confidence and lead to business closures.

As Beijing prepares for next month's Winter Olympics, it is on high alert to prevent new viruses.

After a few cases were reported, authorities closed down an area near Beijing this week. They did not publicly announce the restrictions that had confined 1.2 million residents of Xiong'an New Area within their homes.


 

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