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China Still Moving Forward

Factory activity in China slowed slightly in January, official data showed Sunday, as the country rushed to stamp out a recent coronavirus wave in northern China.

The purchasing managers’ index (PMI), a key gauge of manufacturing activity, came in at 51.3 this month, as the world’s second-largest economy tightened Covid-19 precautions ahead of the Lunar New Year.

The figure was slightly below December’s reading of 51.9, although still above the 50-point mark separating growth from contraction.

“Recently, local clusters of the epidemic emerged successively in many places across the country, and the production and operations of some enterprises were temporarily affected,” said National Bureau of Statistics (NBS) senior statistician Zhao Qinghe.

Zhao added that the period around the Lunar New Year is traditionally an “off-peak season” for the manufacturing industry.

The latest data indicated that the business climate remains weak for small firms, although domestic consumption picked up ahead of the festive period.

Export demand slowed after Christmas as the pandemic continued spreading worldwide, the NBS said.

China’s non-manufacturing PMI saw a larger drop to 52.4, from 55.7 last month, taking a bigger hit from the domestic virus resurgence.

Industries including accommodation and catering saw a “more significant” drop in activity, while the construction industry went into an off-season.

“The services sector may bear the brunt of the new wave of Covid-19, tightening social distancing rules and the reimposition of lockdown measures and travel bans in some parts of China,” said a recent Nomura research report.

“The construction sector may face some downward pressure from colder-than-usual weather this winter,” it added.

S. Jack Heffernan Ph.Dhttps://www.shayneheffernan.com
S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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