China January slows in growth in factory activity as demand falls as COVID rises Reuters

BEIJING (Reuters) – Growth in China’s plant activity slowed in January as a result of the recovery of COVID-19 cases and severe blockages hit production and demand, but the small expansion showed some signs of resilience as the world’s second most likely economy enters a new one. in.

The official Manufacturing Purchasing Managers ’Index (PMI) recorded 50.1 in January, maintaining above the 50-point mark that separates growth and contraction, but slowed from 50.3 in December, the National Bureau of Statistics (NBS) data showed on Sunday.

Analysts had expected the PMI to fall to 50.

The official results contrasted with those of a private survey https://www.reuters.com/markets/europe/chinas-jan-factory-activity-contracts-covid-lockdowns-bite-caixin-pmi-2022-01-30 mostly in coastal regions small manufacturers showed that activity fell at the fastest speed in 23 months.

China’s economy started strong last year, reviving from a major downturn caused by the pandemic, but began to lose strength in the summer, with real estate debt problems and drastic anti-virus measures hitting consumer confidence and spending.

Rising commodity costs and soft demand have also eroded corporate profit margins. The profits of industrial firms grew in December at a slow pace of more than a year and a half.

With the decline in real estate at least in the first half of this year and the emergence of more infectious variants of COVID-19, China’s central bank has begun to cut interest rates and put more money into the financial system to reduce borrowing costs. More modest steps are expected to ease in the coming weeks.

Stability will overcome everything every five years before a Communist Party congress this year, and political leaders want to tackle a sharper slowdown that could weaken job creation.

EXPLAINING RISKS, COVID EXPLANATION

But this easing carries risks, as other central banks around the world, such as the US Federal Reserve, are preparing to raise interest rates, which could lead to capital outflows from emerging markets such as China.

The International Monetary Fund on Wednesday downgraded China’s growth forecast for 2022 to 4.8% from the previous 5.6%, reflecting the impact of property damage and the drastic reduction in consumption of COVID-19.

“Industrial activity slowed due to weak domestic demand,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “Appearances in many cities are also hurting the service sector.”

“The weak PMI indicates that measures to ease government policy have not yet shifted to the real economy … We expect the government to increase policy support in the coming months, especially through more fiscal spending.”

A sub-index of the official production PMI stood at 50.9, down from 51.4 in December, and new orders fell to 49.3 from 49.7.

Although new cases of COVID-19 in China have been low compared to many other countries, the rise in infections at the Xian manufacturing center since the end of December has forced many car and chipmakers to close operations. Production has gradually returned to normal as the city comes out of a blockade.

Samsung Electronics (OTC 🙂 Co Ltd temporarily adjusted operations at Xian manufacturing facilities for NAND flash memory chips last month, but said on Wednesday that production had returned to normal.

The departure from Tianjin was also hurt by a highly transmissible outbreak of the Omicron variant.

At the same time, the government is trying to limit the level of air pollution in the industry ahead of the Beijing Winter Olympics on Friday. China has told steelmakers in northern regions to reduce production until mid-March.

A survey of China’s widespread services sector also showed that growth slowed in January as virus containment measures affected consumer sentiment.

China’s official composite PMI, which combined manufacturing and services, stood at 50.1 in January compared to 52.2 in December.

The Chinese economy grew by 4.0% in the fourth quarter from a year earlier, the weakest year-and-a-half year growth.