China's Caixin Manufacturing PMI steadies in January, but surprises positively

China's Jan Caixin manufacturing PMI came at 51.5 vs 51.3 expected and 51.5 last, with the output growth hitting fresh 13-month highs in the reported month.

Summary

China’s manufacturing sector continued to expand at the start of 2018, with production rising to the greatest extent in just over a year. Growth was supported by further, albeit slightly softer, increases in total new work and new export sales. Higher production requirements led firms to increase their buying activity, while employment fell at the weakest pace for nearly three years. Capacity pressures meanwhile persisted, with backlogs of work rising to the greatest extent since early-2011. Prices data showed that input cost inflation eased to a five-month low and factory gate charges rose only slightly.

Looking ahead, companies were generally optimistic that output would rise over the next year. Moreover, the degree of confidence strengthened to a four-month high.

The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – was unchanged from December’s reading of 51.5 in January, to signal a further modest improvement in overall operating conditions. The health of the sector has now strengthened in each of the past eight months, while the pace of improvement was slightly stronger than the long-run trend.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “The Caixin China General Manufacturing Purchasing Managers’ Index came in at 51.5 in January, unchanged from the previous month, suggesting that operating conditions continued to improve at a modest pace. The sub-indices of output and employment continued to rise, reflecting improving production conditions. The sub-indices of stocks of purchases and stocks of finished goods both improved from December’s relatively low levels. “However, overall new business and new export orders increased at a slower pace than in the previous month, pointing to slightly moderating demand.”