BEIJING (Reuters) – China’s factory activities in January may have declined more slowly than in December, a Reuters poll showed on Monday, with production hampered as workers continued to fall ill after the government announced its “zero-COVID” regime had mined.”
While the “exit wave” of infections swept through the population and workforce faster than economists expected, disruptions to production lines continued.
The official purchasing managers’ index (PMI) for manufacturing improved to 49.8 in January, compared with 47.0 in December, according to the median forecast by 25 economists polled by Reuters, who have reversed a downward trend since September but balked at getting back in enter the expansion territory.
An index value above 50 indicates a monthly expansion in activity, a value below a contraction. The official manufacturing PMI, which largely focuses on large and state-owned companies, and its services sector survey are released on Tuesday.
The data is one of the National Bureau of Statistics’ first indicators of how the economy has fared following the end of China’s “zero-COVID” regime and over the week-long Lunar New Year holiday, which ended on Friday. Many manufacturers had expressed concerns that COVID infections among their workforce and seasonal factory closures would significantly impact industrial productivity for the month.
Eighty percent of people in China were already infected with COVID-19 before the celebrations began, according to China’s chief epidemiologist, with the “exit wave” sweeping the country faster than economists expected and also bringing fewer disruptions.
“Early signs are that conditions improved in January,” according to a statement from Capital Economics, “and any lingering supply-side issues will matter less at a time of year when factories are already ramping down production.” ‘ they added while forecasting a PMI reading of 50.0.
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However, the world’s second largest economy continues to face strong external headwinds on the demand side as China’s export-oriented manufacturers continue to report shrinking order books amid lingering fears of a global recession.
China’s cabinet vowed on Saturday to boost consumption to spur economic recovery. During the Lunar New Year holiday, consumption rose 12.2% year-on-year amid concerns that the service sector could be hampered by staff shortages resulting from COVID.
The Caixin Private Sector Manufacturing Purchasing Managers’ Index, which focuses more on small firms and coastal regions, will be released on February 1st. Analysts polled by Reuters expect a headline reading of 49.5 versus 49.0 in December.
(Survey by Madhumita Gokhale; Reporting by Joe Cash; Editing by Simon Cameron-Moore)
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