By Richard Silk
BEIJING--China's manufacturing sector strengthened slightly at
the start of the year, according to a measure released Friday, but
remains in a weak spot.
A preliminary reading of the HSBC China Manufacturing Purchasing
Managers Index rose to 49.8 in January from a final reading of 49.6
in December. A reading above 50 indicates expansion from the
previous month, while a reading below 50 indicates contraction.
The overall growth of China's economy slowed to 7.4% in 2014,
its slowest pace in more than 20 years, in part because of problems
in manufacturing.
"Today's data suggest that the manufacturing slowdown is still
ongoing amidst weak domestic demand," HSBC economist Hongbin Qu
said in a statement accompanying the figures.
China's export sector has held up relatively well in recent
months, partly thanks to a stronger U.S. economy. The country's
exports increased 6% last year and new export orders continued to
rise in January, according to the PMI, though more slowly than the
month before. The weakness can instead be pinned on feeble sales
within China.
Employment in the manufacturing sector also fell at a faster
rate in January, the PMI showed, which is potentially a major worry
for China's government. Chinese leaders have said they are
comfortable with slowing growth as long as job creation continues
apace. If that changes, they may move more aggressively to
stimulate the economy.
"Employment is a lagging indicator, and the manufacturing sector
has been in a soft state for quite a while," said Macquarie
economist Larry Hu. "In 2015, China's labor market will have more
problems."
Prices for both raw materials and finished products fell faster
in January than the month before, the PMI said, part of a pattern
of deflation that has become entrenched in China's industrial
sector over the past three years.
Against this background of low inflation and weak growth, a
consensus is growing that the government may ease monetary policy
to boost growth this year.
"More monetary and fiscal easing measures will be needed to
support growth in the coming months," said Mr. Qu.
The preliminary PMI figure, also called the HSBC Flash China
PMI, is based on 85% to 90% of responses to HSBC's PMI survey each
month, and is issued about one week before the final PMI
reading.
China's government also produces a PMI. In recent months, it has
performed slightly better than HSBC's, remaining just above the
50-level that separates expansion from contraction.
Write to Richard Silk at richard.silk@wsj.com
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