China’s factory activity expands at the lowest rate in January since August 2019

on Feb 3, 2020
Updated: Mar 11, 2020
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  • China’s factory activity expands at the lowest rate in January since August 2019.
  • Caixin revealed the manufacturing PMI at 51.1 in January versus the analysts' estimate of 51.3.
  • Manufacturing activity in China is expected to remain under pressure in the upcoming months.
  • USD/CNY surged to 7.0250 in the forex market on Monday after the release of economic data.

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In collaboration with IHS Markit, Caixin announced China’s manufacturing purchasing managers’ index (PMI) on Monday. The index reported the nationwide factory activity to have expanded at the lowest rate in January since August 2019.

Caixin revealed the manufacturing PMI at 51.1 in January that came out marginally lower than the analysts’ expectations of 51.3 this month. The economic data weighed further on CNY in the forex market. January’s data also came out lower than December’s 51.5.

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China’s Economy Has Struggled Amidst The Trade War And Coronavirus Outbreak

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Printing above the 50 marks, however, the manufacturing PMI suggested expansion in China’s factory activity in January amidst the Coronavirus crisis and right after striking a phase 1 trade deal with the United States of America.

Director Zhengsheng Zhong of CEBM Group highlighted that the manufacturing activity took a hit due to the falling demand. The total new orders, he added, have declined to the worst reading since September 2019. CEBM is a subsidiary of Caixin.

The data from Caixin matched with that of China’s National Bureau of Statistics that announced the factory activity in the largest Asian economy to have remained capped at 50.0. The Bureau had also commented last week that the impact of Coronavirus outbreak on the manufacturing activity is not entirely evident in January’s report and is likely to weigh on the reports for the upcoming months.

Capital Economics mirrored a similar opinion in its remarks on the Caixin’s report on Monday which highlighted that much of the data collection was completed before the Lunar New Year holidays and that the public was not entirely informed of the gravity and extent of the virus outbreak at the time of performing the survey. As such, Capital Economics added, reports for the upcoming months are likely to remain under pressure.

Manufacturing Activity To Remain Under Pressure In The Upcoming Months

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According to the analysts, now that businesses are suspending operations and consumers and workers alike are requested to stay at home, China’s factory activity is likely to struggle further. In an attempt to contain the virus, China has also extended the Lunar New Year holidays in 2020.

While the official data is directed at the larger businesses and state-owned enterprises, Caixin’s survey primarily covers the small and medium-sized enterprises. Together, both the data reveal a wholesome view of the nationwide manufacturing activity.

Following the economic data on Monday, USD/CNY surged to around 7.0250 in the forex market. The currency pair was previously seen at a much lower 6.95 level at the start of the day.

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