China Caixin manufacturing PMI worsens to 48.3 in January

Factory activity among smaller Chinese firms just got worse. A private survey on China’s manufacturing sector showed factory activity contracting more-than-expected in January.

The weaker start to the new year sets the country on a soft beginning, and confirms analysts’ views on a sluggish economic performance for this year due partly to effects from the United States (US)-China trade war.

The Caixin/Markit Manufacturing purchasing managers’ index (PMI) for January was at 48.3 points, sinking from the 49.7 points in December. Economists in a Reuters poll had expected the sector to fall below the 50-mark that separates expansion and contraction, at a reading of 49.5 points.

For last month, the sub-index for new orders went deeper into contractionary mode. But the silver lining came from an increase in new export orders, suggesting some rebound in orders after the US-China called for a trade truce as last year came to a close.

The PMI sub-index for output fell, reflecting softer production demand. The measure for stocks of finished goods fell into contractionary mode while manufacturers reduced their inventories as the sub-index for stocks of purchased items fell further.

Official PMI numbers released on Thursday showed China’s manufacturing sector contracting for the second straight month in January, but the reading was still slightly higher than analysts’ expectations.

US-China trade talks conclude for this week

China has been embroiled in a scathing trade war with the US in recent months, affecting manufacturing demand as goods get more expensive.

China’s vice premier Liu He visited Washington on Wednesday and Thursday this week to quell the trade spat between both countries. US president Donald Trump said the talks had a ‘tremendous progress’, bringing an upbeat conclusion to the talks.

China has been broadly affected by the weakened trade as it copes with slowing domestic demand.

China’s growth for last year slipped to the lowest annual rate since the 1990s while its 2018 fourth quarter growth slowed to the weakest since the global financial crisis, as domestic and foreign demand slackened amid the country’s trade conflict with the US.