China’s factory activity contracts in January, breaking 3-month expansion

China’s factory activity fell back into contractionary territory in January in advance of an early Lunar New Year holiday period, a drop-off following a rush of purchase orders issued in the run-up to the inauguration of US President Donald Trump and a likely escalation of tariffs on Chinese goods.

The official manufacturing purchasing managers’ index (PMI) – an indicator of factory sentiment – fell to 49.1 in January, compared to 50.1 a month earlier, according to data released by the National Bureau of Statistics (NBS) on Monday.

A PMI reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 signals contraction.

Zhao Qinghe, a senior statistician at the NBS, attributed the performance to the approaching Lunar New Year holiday, with workers heading home early for the festivities.

Most businesses are optimistic about their prospects after the holiday, Zhao added, with the activity expectation subindex for the manufacturing and non-manufacturing sectors at an expansionary 55.3 and 56.7, respectively.

Within the broader PMI figure, the new orders subindex stood at 49.2 in January, down from 51 in the previous month, while the subindex for new export orders fell to 46.4, compared with 48.3 in December.