Construction sector PMI remained above 60 for a fifth month.
Construction sector PMI remained above 60 for a fifth month.

China Manufacturing Sector Continues to Improve

China Manufacturing Sector Continues to Improve

Activity levels across China’s manufacturing sector continued to improve in January, continuing the solid if not spectacular performance seen in the second half of 2016.
The government’s manufacturing purchasing managers index fell 0.1 point to 51.3, fractionally above the 51.2 level that had been expected by economists, Business Insider reported.
A PMI measures the changes in activity levels across China’s manufacturing sector from one month to the next. It ranges from a score of 0 to 100, with 50 deemed neutral. Anything above 50 indicates that activity levels improved, while a reading below 50 suggests activity levels declined. At 51.3, it suggests that conditions improved marginally across the sector in January.
By size of manufacturer, China’s National Bureau of Statistics said that growth among larger firms slowed with the PMI subindex sliding to 52.7, down 0.5 points from December. That performance was mirrored by smaller manufacturers whose PMI fell 0.8 points to 46.4, leaving it in contractionary territory.
Medium-sized firms bucked the trend with its PMI rising by 1.2 points to 50.8, indicating that business conditions improved fractionally.
By activity subindex, production growth moderated to 53.1, down from 53.3 in December, while growth in new orders—indicative of domestic demand—also slowed, falling 0.4 points to 52.8.
New export orders—a gauge on international demand—came in at 50.3, up from 50.1 in December and the equal highest level seen in over a year.
Elsewhere employee numbers, inventories of both raw materials and finished goods, along with supplier delivery times, all contracted.
Like the nation’s manufacturing sector, other sectors of the economy continued to improve with the separate non-manufacturing PMI increasing to 54.6.
That was up 0.1 points from December, continuing the solid recovery in what is now the largest component within the Chinese economy.
By sector, the NBS said that individual PMIs for most sectors remained above 55.0, suggesting that activity levels continued to improve at a decent clip last month.
Of note, the PMI for the nation’s construction sector remained above 60.0 for a fifth straight month, coming in at 61.1 in January.
However, fitting with recent measures introduced by policymakers to cool China’s hot housing market, conditions across the nation’s real estate sectors deteriorated from a month earlier.
That divergence will be worth watching in the months ahead, with activity in China’s real estate market seen as a lead indicator for that in the nation’s construction sector.
Given the lack of movement seen in both indices – merely continuing the trend of recent months—the reaction across financial markets has been almost non-existent.

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