Breaking: Chinese Caixin Manufacturing PMI (Jan) 51.1 vs 51.5 prior

Mainland China markets reopened today for the first time since 23 January and we are seeing the Caixin/Markit Jan manufacturing PMI vs the previous 51.5.

Caixin/Markit Jan manufacturing PMI

China Caixin/IHS markit January manufacturing PMI at 51.1 (vs 51.5 in December).

Key notes

• Caxin Jan factory activity eases, misses analyst forecasts.
• Growth was faltering before virus outbreak.
• Outbreak raises risk of shock to economy, more stimulus expected.
• Production and new order growth soften.
• Export orders and employment slip back into contraction.

Description

The Caixin China Manufacturing PMI™, released by Markit Economics, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.

Reuters:

China's factory activity expanded at its slowest pace in five months in January, even as an outbreak of a new virus added to risks facing the world's second-largest economy, a private survey showed on Monday.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) eased to 51.1 from 51.5 in December, missing expectations but remaining above the 50-mark that separates growth from contraction for the sixth straight month. Analysts had expected a reading of 51.3.

The findings, which focus mostly on small and export-oriented businesses, were slightly more optimistic than those in an official survey released on Friday, which showed growth had stalled. 

Limited improvement in domestic and foreign demand meant some manufacturers did not replenish stocks, said Zhong.

New export orders slipped back into contraction after three months of expansion, while production and total new orders slowed but remained in expansionary territory.

Factories also shed jobs in January for the first time since October.

But business confidence rose to a 22-month high, boosted by a trade deal signed in January between the United States and China, Zhong said. Fears of an epidemic only began to surface late in the month.

Economic growth in China slowed markedly to 6.1% last year, the weakest pace in nearly three decades, amid a bruising trade war with the U.S and despite Beijing's stimulus to boost sluggish investment and demand.

Coronavirus latest data

Meanwhile, the China stock markets opened down nearly 9% a the start of the day with 2,829 new cases of coronavirus were reported in China on Feb 2, total infection reaching 17,205. The total death toll is now up to 361. In total 475 were discharged.

"The increases are all higher than a day earlier. The only good news is the growth rate of the discharged patients is the highest," HuXijin, the Chief in Editor at the Global Times reported.

During the SARS outbreak in 2002-03, China's economic growth fell 2 percentage points in a few months, but it rebounded quickly once the disease was brought under control. However, both Chinese demand and the global economy had generally been in better shape.

"In the near term, China's economy will also be impacted by the new pneumonia epidemic," and will need more government support, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in comments on the survey.

FX implications

The yuan is on the back foot and has fallen against the US dollar to the lowest levels for the year so far, 6.9913 in USD/CNY. AUD/USD is trying to stabilise ahead of the Reserve Bank of Australia. There was little reaction to the data. 

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