MNI: 5 Things We Learned From China January PMI

     BEIJING (MNI) - The following are the key points from the official China

Manufacturing Purchasing Managers' Index (PMI) for January, jointly released on

Wednesday by the China Federation of Logistics and Purchasing (CFLP) and the

National Bureau of Statistics.

      - Headline PMI index softened to 51.3 in January, the weakest in eight

months, compared with 51.6 in December and 51.3 in January 2017. It was lower

than the median of an MNI survey projecting 51.5. The January reading was the

18th consecutive month that manufacturing sentiment remained above the 50-point

mark, which divides expansion and contraction.  

*** "Among the 13 sub-indexes comprising the headline, 10 edged down due to

seasonal reasons and weak external demand as the yuan has seen a sharp

appreciation," said CFLP economist Chen Zhongtao. 

      - The production index fell 0.5 percentage point to 53.5 from December.

The equipment manufacturing index was dragged down by sluggish exports, falling

2.6 percentage points from December to 50, the lowest since March 2016.

Production activity of large- and medium-sized manufacturers dropped 0.4 and 0.3

percentage point respectively, while that of small manufacturers contracted 0.2

percentage point.  

*** MNI COMMENT: The fight against pollution and the curbing of excess

production capacity are taking a toll on factory activities. There are some

seasonal effects as well, as factory activities in China typically slow

approaching the Chinese New Year, when migrant workers begin to return home for

annual holidays. 

 - Demand was weaker. Overall new orders index eased 0.8 percentage points to

52.6, with the new export orders index softening 2.4 percentage point to 49.5,

falling back into contraction for the first time in 15 months. Imports index

fell to 50.4 from December's 51.2.  

*** "The sharp appreciation of the yuan has placed a large burden on exports,"

CFLP Chen said. About 11.7% exporters noticed greater burden from the yuan's

appreciation, up by almost 2 percentage points from December, Chen said.  

      - Prices fell as the supply of raw materials increased. Input prices grew

slower at 59.7 in January after a jump to 62.2 in December, while output price

growth increased to 51.8 from 54.4. However, the spread of the two prices

further widened, indicating that manufacturers' profit margins narrowed.

      - The CFLP services PMI rose in January to 55.3 from 55.0 in December. The

CFLP attributed the growth to the New Year holiday. It was the fifth consecutive

month that the reading stayed above 54.0, which is still relatively high.  

However, the activity index of the construction sector dropped 3.4 percentage

points to 60.5, indicating the property sector would remain weak for the month.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

[TOPICS: M$A$$$,M$Q$$$]