January factory activity in China expanded at its slowest pace in seven months, according to the private Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) on Monday, sending a signal that rising coronavirus cases are dampening sentiment.
A Caixin/Markit survey, focused mainly on smaller manufacturers, showed the January PMI at 51.5, down from 53.0 in December on concerns about new coronavirus infection rates, higher consumer prices and US-China trade and geopolitical tensions.
The survey followed a China release from the National Bureau of Statistics on Sunday focused on larger state-owned firms shat showed the official PMI as 51.3 in January from 51.9 in December. A PMI level of above 50 represents an expansion of factory activity, which both surveys show.
"The recent localized transmission has had a certain impact on the operation and production of some enterprises, and the overall expansion of the manufacturing industry has slowed," Zhao Qinghe, of the statistics agency.
The slower pace of factory growth comes ahead of the Lunar New Year festival in China, with the government calling for less travel during the holidays (11-17 February). A Ministry of Transport official said earlier last month there would be 40% fewer trips for 2021 compared to 2019, but high-frequency figures so far suggests the contraction could be bigger than that.
Trading economic said rising coronavirus infections in some of China's big cities has dimmed the outlook, though recovery is still underway. "Money spent on travel, food and other basic needs will be limited and could result to an increase in industrial output as some manufacturers take advantage of the holidays to boost production and keep up with demand," according to an analyst.
China's economy rose by 2.3% last year, the slowest pace for growth since 1976, but it is seen to be the only major economy to have expanded in 2020 despite the global health crisis.
