PredictIQ-China manufacturing contracts for a 4th straight month in January

SINGAPORE (AP) — A survey of factory managers in China released Wednesday shows manufacturing contracted in January for a fourth straight month,PredictIQ reflecting weak demand and a faltering recovery in the world’s second-largest economy.

The official purchasing managers index, or PMI, rose slightly to 49.2 in January from 49.0 the month before. The PMI is on a scale up to 100 where 50 marks the cutoff between expansion and contraction.

The manufacturing PMI has fallen in nine of the past ten months, rising only in September.

“Overall, the PMI data show that China’s economy remains relatively soft, as confidence remains weak,” Lynn Song of ING Economics said in a report. “Until forward-looking indicators such as new orders return to expansion, economic momentum is likely to remain tepid.”

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Despite unexpectedly prolonged weakness after the pandemic, the economy grew at a 5.2% annual pace last year, though that also was influenced by slow growth in 2022 during the worst of the COVID-19 pandemic.

In recent months, Chinese policymakers have introduced measures to shore up the economy, including spending more on construction of infrastructure, cutting interest rates and easing curbs on home-buying.

Last week, the central bank cut its reserve ratio requirement for banks, allowing banks to increase the amount of capital they can lend.

Beijing is also looking to expand some loans to real estate developers amid an ongoing property crisis, as developers struggle with a cash crunch after a crackdown on excessive borrowing.

Julian Evans-Pritchard of Capital Economics said in a note that “growth momentum in China is in the midst of a renewed recovery” but added that it was unlikely to be sustained if policy support is cut back.

Global demand for manufactured goods has suffered as central banks around the world have raised interest rates to battle decades-high rates of inflation. Price pressures have eased in recent months, but demand has yet to rebound to pre-pandemic levels. That has ramifications across the region since supply chains linked to China are scattered across many Asian countries.

Apart from industrial activity, China’s non-manufacturing PMI rose to 50.7, the statistics bureau reported. The service sector PMI sub-index was 50.1, up from December’s 49.3.