Postion :Home>Economic Statistics Data> List

PMI drops in January, steady growth expected

By Li Qiaoyi

The purchasing managers' index (PMI) slid slightly to 55.8 in January from 56.6 in December, the China Federation of Logistics and Purchasing (CFLP) announced Monday.

The PMI, though it fell short of general market expectations at 56.5, remains at a relatively high level. The January PMI reading was the second lowest since November 2008 when the reading hit a record low of 38.8.

The PMI has been above 50 for 11 consecutive months, signaling an expanding economy. Seventeen of 20 industries surveyed recorded readings above 50.

Of the 11 sub-indexes, five declined from the previous month including sub-indexes measuring production and new orders, while the others rose from December, including sub-indexes measuring new export orders and imports.

The rising new export orders sub-indexes bode well for the continuing recovery of exports, said Zhang Liqun, a special analyst with the CFLP.

The increase in the imports sub-index also "provides some optimism for a recovery in exports in the months ahead," as nearly half of the country's exports are processing exports, said Lu Ting and TJ Bond, economists at Bank of America-Merrill Lynch in Hong Kong.

However economists believe the ease in the reading indicates the rapidly expanding manufacturing sector is likely to enter a steady growth phase.

"The forward-looking PMI index has started to show signs of concern on the economic outlook," economists led by Ken Peng at Citigroup wrote in a research note Monday.

The central bank has taken action to slow down credit growth, though official an-nouncements have reiterated that a proactive fiscal policy and moderately easy monetary policy will be continued, Fan Gang, a central bank adviser and one of China's most influential economists, said Monday at a media briefing held by MasterCard in Beijing.

"The new PMI reading should have eased the concern of overheating while the upside risk of inflation remains," said the Citigroup research note.

Inflationary pressures are on the rise, the CFLP also said in a statement. The purchase prices sub-index reached 68.5 in January, up 1.8 points from December. The 20 industries surveyed all recorded readings above 50 in the sub-index measuring purchase prices, with 15 above 60 and six even above 80.

The purchase price hike will add pressure to the rise in the producer price index (PPI), said Lu Zhengwei, a senior economist at the Industrial Bank. PPI is likely to remain at a relatively high level in January compared with December, Lu said.