China: Surprisingly Strong Manufacturing Start for 2012

Econintersect:  The Chinese PMI (Purchasing Manager’s Index) not only remained above 59, which defines expansion, but increased to 50.5 in January.  This was an increase from 50.3 in December and a complete surprise to many observers who had expected a decline, perhaps below 50 which would have indicated a contraction if it had occurred.  As reported by GEI News, manufacturing output has experienced a two month decline for November and December 2011.  The PMI was expected to be weak as a result.

According to the Financial Times, domestic demand has kept the manufacturing sector afloat as exports have been declining.  The FT goes on to say there are signs of resiliency in the Chinese economy.  From the Financial Times:

“The Chinese economy has gradually stabilised. The rise in new orders and raw material inventories reflects a recovery for industrial companies,” said Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing.

Some economists have warned that the January data has seen “significant adjustments” because of the Chinese New Year occurring during the last two weeks.  During that time some factories were closed and others were running at reduced capacity.

Sources:

• China’s factories in strong start to 2012 (Financial Times, 1 February 2012, as found on Econintersect Asia Newspaper page )

• China: Manufacturing Activity Falls Again (GEI News, 3 January 2012)