China’s economy continued to slow in January according to purchasing manager indexes

​The latest reading of the official index of manufacturing purchasing managers (PMI) compiled by China’s National Bureau of Statistics fell to 49.8 in January. The alternative PMI reading produced by HSBC uses a greater weighting for small, privately owned firms. It dipped below the 50-point level already in December, and stayed there in January. Of the key sub-indices of the NBS manufacturing PMI, Employment Index (manufacturing jobs) and New Order Index (export orders) post readings below 50 in January. The Employment Index hit 47.9, its lowest reading since the beginning of 2013.

A PMI reading below the “neutral” level of 50 points in theory should be reflected in seasonally adjusted output data that show a drop from the previous month. In practice, however, the correlation between industrial output and PMI readings is somewhat messier. The NBS figure for on-month changes in industrial output has been relatively strong even when PMI readings have been under 50. In any case, the on-going slowdown in growth of industrial output remains clear. NBS figures for actual production in January-February will not be available until March.

Service sector growth, in contrast, appears quite resilient, even if growth has slowed a bit. The services PMI value was 53.7 in January. Even if growth in labour demand in the service sector also appeared to come to a halt in the second half of 2014, demand appeared to recover at least briefly in January.

Employment Index for Manufacturing and Services PMIs

Source: Macrobond