China’s economic recovery may prolong. Fresh January economic data show continuing deterioration, meaning that efforts such as cutting production capacity to tackle oversupply in the manufacturing sector are yet to pay off. According to China’s National Bureau of Statistics, operational conditions at large state-owned manufacturing companies contracted 0.3 points in January based on Purchasing Managers’ Index (PMI) measurements.
China’s manufacturing industry
Early indications show a bumpy start for China’s manufacturing sector. PMI data, which gauge the operational conditions of mostly government-owned manufacturing companies, show that those conditions were down to 49.4 points in January. That indicates a 0.3 points drop from December, which was a bit lively month for Chinese economy.
With the manufacturing activities in China staying at below 50 points in January, that marks a six-month consecutive decline in China’s industrial activity. The PMI data further dampen hope of a much-needed Chinese economic recovery.
China’s service sector
PMI data for China’s service industry show that activity in the sector contracted to 53.5 in January from 54.4 in the previous month.
China’s private sector appears to be showing greater salience to the economic downturn than their public counterpart. For example, PMI data shows that industry activity for private manufacturers in China moderated in January at a time when similar indicator for public companies contracted.
A number of factors have been blamed for the weaker economic figures for China in January. For example, it is said that the upcoming Sprint Festival is having a negative impact on economic indicators. Ongoing capacity reduction to correct oversupply and the cold weather are some other factors believed to have limited economic growth last month.
For 2015, profit of industrial companies in China fell 2.3% compared with an increase of 3.3% in the previous year. In the last month of 2015, profits were down a whopping 4.7% to just $124 billion, which contrasts with a 1.4% decline a month earlier.
The January economic progress confirms that China has a long way to go to get back to the economic condition it was in before the slowdown began.