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China's factory recovery slows in January as COVID-19 returns

Published 01/30/2021, 08:21 PM
Updated 01/31/2021, 06:10 PM
© Reuters. Employees work on a production line manufacturing metal parts for furniture at a factory in Hangzhou

© Reuters. Employees work on a production line manufacturing metal parts for furniture at a factory in Hangzhou

BEIJING (Reuters) - China's factory activity grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, but still in line with the ongoing recovery in the world's second-largest economy.

The official manufacturing Purchasing Manager's Index (PMI) fell to 51.3 in January from 51.9 in December, the National Bureau of Statistics said in a statement on Sunday.

It remained above the 50-point mark that separates growth from contraction on a monthly basis, but was below the 51.6 expected in a Reuters poll of analyst forecasts.

In January, mainland China reported more than 2,000 local cases of the coronavirus. While the number was small compared with other countries, authorities were concerned about transmission risks during the Lunar New Year travel rush - the world's biggest annual human migration spanning 40 days from January to February.

During the month several large cities were locked down with tens of millions tested for COVID-19, interrupting factory activity and weighing on the services sector, including logistics and transportation.

"The recent localised epidemic has had a certain impact on the production and operation of some enterprises, and the overall expansion of the manufacturing industry has slowed," said Zhao Qinghe, an official at the statistics bureau.

"The period before and after the Lunar New Year is also traditionally an off-season for the country's manufacturing industry," Zhao said in an accompanying statement.

The new coronavirus outbreak, mostly in the north, is expected to be a temporary restraining factor while China's vast industrial sector continues to find strength in resilient export demand.

The official PMI, which largely focuses on big and state-owned firms, showed the sub-index for new export orders stood at 50.2, expanding for the fifth straight month, though down from 51.3 in December.

Economic indicators ranging from trade to producer prices all suggest a further pickup in the industrial sector.

A sub-index for small firm activity stood at 49.4 in January, up from December's 48.8.

China's gross domestic product grew 2.3% on year in 2020, making it the only major economy in the world to dodge a contraction last year as many nations struggled to contain the COVID-19 pandemic.

The central bank will extend the country's monetary policy support for economic growth with a focus on maximising employment to help boost consumption, Governor Yi Gang said last week.

© Reuters. Worker works on a production line at a factory of a ship equipments manufacturer, in Nantong, Jiangsu

In the services sector, activity expanded for the 11th straight month, the statistics bureau said, albeit at a slower clip, weighed by the latest COVID-19 outbreaks.

Latest comments

If China slows down, the world will be hurting much more...
China has made it clear they can take care of their own. Let them.
who else cared if not those that for decades have been buying cheap stuff to make money out of it?
would you rather they not buy at all?
can you imagine going to work
bruh we didn't even stopped working at all during the entire pandemic. There are inconveniences but otherwise life is normal
Nobody cares about covid 19 anymore
Time to wait outside !! Buy low at 30%
more downfall on the way...30% more correction in global market unavoidable before Feb expiry.....
One of the reasons are the closure of the ports
China new year ...all.close long break
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