The Chinese economy started the year on an uncertain footing, as Covid-19 flare-ups disrupted factory activity and consumer spending, according to a trio of manufacturing and service sector surveys released Sunday.
Two gauges of Chinese manufacturing activity—one official and one private—each retreated in January, while a third measure, of the country’s services sector, brought into relief the deep toll that the latest burst of coronavirus infections has inflicted on domestic demand.
China’s official manufacturing purchasing managers index fell to 50.1 in January, the National Bureau of Statistics said, down from 50.3 in December and just above the 50 mark that separates activity expansion from contraction.
The result was in line with the median forecast among economists polled by The Wall Street Journal and marked the third straight month that the measure was in expansionary territory
However, the subindex measuring total new orders fell deeper into contraction, dropping to 49.3 in January, while new export orders improved to 48.4 in January—still in contractionary territory. Factory production in January weakened to 50.9 and would likely have been even softer if not for an acceleration in the production of consumer goods ahead of the Lunar New Year holiday that begins on Feb. 1, the statistics bureau said.
Meanwhile, the Caixin China manufacturing PMI, a private gauge that is more focused on small private businesses than the official manufacturing index—which is weighted more toward large state-owned enterprises—tumbled to 49.1 in January, its lowest level since February 2020, at the height of the initial Covid-19 outbreak in China.
The steep drop in the Caixin manufacturing PMI, from a reading of 50.9 in December, came as the subindexes for output and total new orders dropped to their lowest levels since August, Caixin said.
Overseas demand also contracted at a faster-than-usual clip, as the rapid spread of the Omicron variant of the coronavirus damped global consumer sentiment.
The subdued demand prompted manufacturers to slow their pace of hiring in January to keep costs down, Caixin’s employment subindex showed.
“This year, policymakers should make stability their focus,” said Wang Zhe, an economist at Caixin Insight Group, in a news release accompanying the release of the data Sunday.
Separate data on China’s services sector, also released Sunday by China’s statistics bureau, showed renewed weakness in a section of the economy that has lagged behind the broader pandemic recovery for nearly two years.