China PMI surprises as factory activity contracts in January; Jump Dicember Industrial Bectits Jump

China’s factory activity in January contracted unexpectedly, reversing expansionary momentum in the past three months, partly due to a slow season ahead of the Lunar New Year.

The official purchasing managers index for January reached 49.1, Data published by the National Statistics Office on Monday it was shown.

The reading missed Reuters poll estimates of 50.1. PMI in December reached 50.1, while in November it was 50.3. A PMI reading above the threshold of 50 indicates expansion in activity, while one below that denotes contraction.

Manufacturing PMI in January tends to be softer as migrant workers return to hometowns ahead of the Chinese New Year, which falls on Jan. 29, said Hui Shan, chief China economist at Goldman Sachs.

China’s non-manufacturing PMI, which measures services and construction activity, fell to 50.2 in January, compared with 52.2 in the previous month.

Separately, China’s industrial profits jumped 11% in December of the previous year, growing for the first time since July.

Corporate profits have recovered from a sharp 27% year-on-year drop in September, their steepest drop since March 2020 during the Covid-19 pandemic. They had fallen 7.3% in November and 10% in October, as a slump in the real estate sector and bleak income prospects continued to weigh on consumer demand.

Industrial profits are a key indicator of the financial health of factories, utilities and mines in China.

Full-year industrial profits in 2024 fell 3.3% from a year earlier, extending declines to a third consecutive year.

The second largest economy in the world met official annual growth target last yearexpanding 5.0%, as a flurry of stimulus measures are in play. Economists had pointed out the Industrial production growth will exceed retail salesunderscoring the strength of the country’s supply side, while domestic demand remained weak.

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