Industry PMI Photo:VCG

China's factory activity continued to expand in January, though growth seems to have moderated with the approaching holiday season and recent flare-up of domestic COVID-19 cases, official data showed on Sunday.

According to official data released by the National Bureau of Statistics (NBS) on Sunday, China's manufacturing Purchasing Managers' Index (PMI) hit 51.3 in January. The manufacturing PMI has stayed above the 50 mark for 11 consecutive months.

The January reading dropped from the December PMI reading, which was 51.9, showing the manufacturing sector is stabilizing after a period of vehement surge. 

The overall expansion of the manufacturing industry has slowed down with the upcoming Spring Festival, which is a traditional off-season for China's manufacturing industry, and the recent rising domestic coronavirus infections have slowed business performance, said NBS senior statistician Zhao Qinghe.

The January PMI data, though 0.6 percentage points lower than that of December, saw the manufacturing industry as a whole maintain a good momentum of steady recovery, he said.

According to the NBS, the factory activity of large and medium-sized enterprises remained stable, though the reading has dropped to 52.1 and 51.4, down 0.6 and 1.3 percentage points respectively from the previous month, while the PMI for small-sized enterprises hit 49.4, up 0.6 percentage points from last month as business continues to rebound.

Some enterprises surveyed said that new clusters of infections, centered in northern China, as well as the Spring Festival, have affected the attendance rate of employees, which increased the employment gap. The slowdown of logistics due to the pandemic has affected the export of products and the purchase of raw materials for some local enterprises.

The official non-manufacturing PMI fell to 52.4 in January, down 3.3 percentage points from the previous month.

The service sector is displaying signs of a considerable slowdown amid the government's move to restrict travel and gatherings amid recent clusters of COVID-19. The business activity index of the service industry dropped to 51.1, 3.7 percentage points lower than last month.

In particular, the business activity for accommodation, catering, culture, sports and entertainment sectors, dropped significantly because of the rising virus infections. 

In addition, the business activity index of road transport and air transport has dropped below the benchmark with some slowdown of logistics in some areas, coupled with the reduction of business trips and holiday travels.

That said, the coming Spring Festival is to dial up the domestic consumption industry, with the PMI of the consumption sector hitting 52.3 in January, up 1.8 percentage points from December.

"The slowing down of the PMI in the winter season is within normal seasonal fluctuations as the production activity is usually reduced during the Spring Festival," Liu Xuezhi, an economist at the Bank of Communications told the Global Times on Sunday. 

However, it should be noted that the sporadic COVID-19 outbreaks have put some pressure on the PMI in recent months, he said.

Although the PMI has been declining for two consecutive months, it does not mean that China's economic recovery is coming to a stop. "As long as the reading is in the expansion range it means that China's economic expansion will continue," said Liu.

Global Times