Chinese manufacturers saw a fractional deterioration in operating conditions at the start of 2015. Although output rose slightly and new orders broadly stabilised,
staffing levels were cut for the fifteenth successive month. Meanwhile, relatively subdued client demand led companies to reduce their stock holdings of both post and pre-production goods in January. On the costs front, lower raw material prices led to the steepest reduction in average input costs since March 2009, which
contributed to a sharp decline in prices charged.
After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 49.7 in January, down slightly from the earlier flash reading (49.8), but up fractionally from 49.6 in December. This signalled a second successive monthly deterioration in the health of the sector, albeit only slight.
Latest data indicated a renewed expansion of Chinese manufacturing output in January, though the rate of increase was only fractional. This was the first time that
production has risen in three months. Meanwhile, total new business was broadly unchanged, following a slight reduction in December. According to panellists,
relatively muted client demand, both at home and overseas, dampened new order growth. Furthermore, growth in new export work eased to a marginal pace that was the slowest in the current nine-month sequence.
Manufacturing companies reduced their headcounts again in January. That said, the rate of job shedding was the weakest recorded in 15 months and only slight.
Reduced workforce numbers contributed to a further accumulation of outstanding business in January. That said, the rate of increase eased since December and
was modest overall.
Purchasing activity meanwhile declined for the second straight month in January. However, the rate of reduction was similar to that seen in December and marginal. Relatively subdued client demand also led companies to reduce their inventories of inputs and finished goods at the start of the year. Furthermore, stocks of pre-production goods declined at the strongest rate in nine months.
Average input costs declined for the sixth month running in January, with the rate of deflation accelerating to the sharpest since March 2009. Output charges set by Chinese manufacturers also fell at an accelerated rate in January.
The Chinese government’s official PMI dipped to 49.8 for January, the first reading below 50 since 2012.
Chinese policy makers and investors are now in for an extended period of uncertainty. Data for the first two months of the year are heavily distorted by the variable timing of the week-long Lunar New Year holiday, which this year starts Feb. 18.
Trade data during this period is often volatile and difficult to interpret. Rather than trying to adjust for the seasonal distortions, the National Bureau of Statistics publishes January and February data together for indicators like industrial production and fixed-asset investment.
In other words, a clear picture of how the Chinese economy is performing won’t emerge until March at the earliest. (WSJ)
- Domestic demand held up better than external demand – the export orders subcomponents of both indices fell markedly last month.