China's January Manufacturing Growth Slows Amid Trade Uncertainties
China's manufacturing sector experienced a deceleration in growth during January, with a private-sector survey indicating a slower expansion rate and declining staffing levels.
PMI Dips to Four-Month Low
The Caixin/S&P Global manufacturing purchasing managers' index (PMI) fell to 50.1 in January, down from 50.5 in December. This reading missed analyst expectations of 50.5 and represented a four-month low. However, it remained above the 50-mark separating contraction from growth.
Production and Orders Rise, But Export Orders Decline
Despite the overall slowdown, manufacturing production and new orders both increased in January. Production accelerated from December, while new orders grew at their fastest pace since November. Factory owners attributed the increase in orders to improved demand and anecdotal evidence of clients stockpiling inventory.
However, new export orders declined for the second consecutive month, reflecting the ongoing trade uncertainties between China and the United States.
Job Losses Accelerate
The Caixin survey also revealed a sharp decline in employment levels, with the rate of job shedding reaching its fastest pace since February 2020. Manufacturers cited non-replacement of job leavers and redundancies due to cost concerns as reasons for the job losses.
Rising Backlogs
Despite the reduction in staffing, the increase in new orders led to a fourth consecutive month of backlogged work in the manufacturing sector.
Policy Implications
The survey suggests that the rising trade uncertainties pose significant challenges for China's economy. Economist Wang Zhe of Caixin Insight Group emphasizes the need for well-prepared and promptly adjusted economic policies to adapt to evolving circumstances.