BEIJING, Jan 31 (Reuters) – China’s economic activity returned to growth in January, after a wave of COVID-19 infections swept through the country faster than expected following the abandonment of pandemic controls.
Domestic orders and consumption pushed output higher, according to early broad data showing how quickly China is recovering from its COVID reopening spree, but analysts warned the economy faces lingering weakness in the economy. external demand.
The official Purchasing Managers’ Index (PMI), which measures manufacturing activity, fell from 47.0 in December to 50.1 in January, the National Bureau of Statistics (BNS) announced on Tuesday. Economists in a Reuters poll had predicted the PMI would come in at 48.0. As the result was greater than 50.0, this implied growth.
A rebound in non-manufacturing activity was more decisive than economists expected – but helped by a seasonal surge in spending for the Lunar New Year holiday. This index, which covers services, jumped to 54.4 from 41.6 in December.
Both indices had previously shown the economy had been contracting since September.
“The PMI data showed that confidence in production, operations and the state of the market has improved significantly,” Bruce Pang, chief economist at Jones Lang Lasalle, wrote in a note, while pointing to the level of a sub-index for new export orders, just 46.1, as cause for concern.
As foreign economies weakened under the pressure of rising interest rates, demand for Chinese exports also weakened, which last month was 9.9% lower than a year earlier. .
January’s rebound in activity “is a bit unexpected as everyone is still quite cautious,” said Dan Wang, chief economist at Hang Seng Bank China. “It is difficult for PMI to resume in the same month as Chinese New Year, as workers normally have two weeks off.”
“All other real indicators – employment, inventories and delivery times – have deteriorated… Export orders have fallen, which means domestic orders must have increased,” he said. she adds.
FAST WAVE
Yet the speed of business recovery matches what is increasingly seen as a wave of infection that came very quickly, disrupting work and consumer demand, and then also faded very quickly, leaving factory managers to get production back on track and retailers to welcome new customers.
According to the country’s chief epidemiologist, 80 percent of people in China had already been infected with COVID-19 before the start of the Lunar New Year festivities.
Still, strong holiday consumption flattered the January PMI report. Lunar New Year consumption was previously reported to be 12.2% higher than last year’s holiday period, while holiday travel within China for the same period jumped. by 74%, as people headed out to celebrate for the first time in three years without COVID-19 restrictions.
After almost three years of following a zero-COVID strategy, China eased pandemic controls in November, then abandoned them almost completely in early December.
For the festive period, factories have tried to make up for the ground lost during the disruptions of last year. Kevin Whyte, who buys housewares in China for a major Britain-based retailer, told Reuters that his partner factory in China had offered workers bonuses to shorten their holidays over the New Year period.
The cabinet said on Saturday it would promote a recovery in consumption as the main driver of the economy and also aim to help importers.
The IMF also addressed the speed of China’s economic recovery on Tuesday. The boost from renewed mobility would be short-lived, he said.
The international agency revised its outlook for gross domestic product expansion in 2023 up to 5.3%, from 4.4% estimated in October, but warned that growth would likely drop to 4.5% in 2024 .
The official composite PMI, which combines manufacturing and services, rose to 52.9 from 42.6 in December.
The private sector Caixin manufacturing PMI, which focuses more on small businesses and coastal regions, will be released on February 1. Analysts polled by Reuters expect an overall reading of 49.5, down from 49.0 in December.
Reporting by Joe Cash; Editing by Bradley Perrett
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