China’s official performance of manufacturing index (PMI) for January is out, and it’s a miss.
The index printed at 49.4, down from 49.7 in December and missing market expectations of a read of 49.6.
It was also the sixth month in succession that the index came in below the 50 level that separates expansion from contraction, and marked the steepest decline in activity seen since August 2012.
As the chart below reveals, the stretch of sub 50 readings is now the longest on record.
According to China’s National Bureau of Statistics (NBS), authors of the report, output fell 0.8 points to 51.4 while new orders – a harbinger for future levels of activity – slid 0.7 points to 49.5, leaving the subindex in contractionary territory.
Weakness in new export orders, down 0.6 points to 46.9, was largely behind the decline in overall order numbers.
Like the official PMI gauge, the separate Caixin-Markit PMI remained deep in contractionary territory.
Despite increasing 0.2 points to 48.4, beating forecasts for a decline to 48.0, January was the eleventh month in succession that activity levels had contracted.
The internals of the report, like the headline index, were hardly inspiring.
Production contracted at the fastest pace seen in four months while new orders, led by external demand, fell for a seventh consecutive month.
“According to panellists, relatively weak market conditions and fewer new orders led firms to cut production,” wrote Markit.
Reflective of falling demand and production, the survey’s employment subindex recorded its fastest contraction since October 2015.
In a sign that deflationary forces remain strong across the sector, output prices also declined, extending the trend of the prior 17 months.
The NBS survey is more widespread than than the Caixin-Markit report, collating responses from large, medium and small firms from both the private and public sectors. The Caixin-Markit report has a smaller sample size, with its focus on the performance of privately-owned small to medium sized firms.
As opposed to the manufacturing sector, China’s services sector continued to outperform in January, although the expansion in activity levels also cooled compared to a month earlier.
The NBS’ non-manufacturing PMI gauge fell to 53.5, down on the 54.4 level seen in December.
While activity levels continued to expand, the 0.9 point decline indicates that the pace of growth decelerated in January.
Though the official and Caixin-Markit PMI surveys are released on the same day, markets will not get a separate read on service sector activity until Markit releases its service sector PMI report for January on Wednesday, February 3.