China: Soft PMI data indicates domestic challenges – ING

China's official manufacturing purchasing managers’ index (PMI) fell to 49.3 in January, indicating a contraction and coming in well below forecasts. The non-manufacturing PMI also slipped back into contraction at 49.4, marking a 37-month low. This suggests ongoing domestic challenges as external activity remains stronger, notes Lynn Song, Chief Economist for Greater China at ING.

Manufacturing and non-manufacturing PMIs decline

"China's January PMI fell back into contraction at 49.3, down from December's 50.1. This came in well below forecasts for another month of expansion. Manufacturing PMI has been in contractionary territory for nine of the past 10 months."

"The decline back below 50 in January suggests that the trajectory remains negative. Most of the key sub-indices softened on the month. New orders (46.1) and export orders (46.9) both fell from December's levels."

"One of China's main goals is to improve services consumption and quality to boost domestic demand as a growth engine. Potential efforts to boost services consumption could eventually be reflected in the non-manufacturing PMI data later in the year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)