China Factory Growth Stalls in January

China’s manufacturing growth stalled for the second straight month in January and companies had to cut prices at a faster clip to win new business, adding to worries about growing deflationary pressures in the economy, a private survey showed.  The HSBC/Markit Flash Manufacturing Purchasing Managers’ Index (PMI) hovered at 49.8 in January, little changed from December’s 49.6 and just below the 50-point mark that separates contraction from growth on a monthly basis.

A Reuters poll had forecast a second month of contraction with a reading of 49.6.  Reflecting the tumble in oil prices, which have more than halved in the last six months, a sub-index for input prices sank to 39.9, a level not seen since the global financial crisis.

But companies also had to cut output prices for the sixth straight month to sell their products, and more deeply than in December, eroding their profit margins.  “Today’s data suggest that the manufacturing slowdown is still ongoing amidst weak domestic demand,” Qu Hongbin, a HSBC economist in Hong Kong said on Friday.

Reuters

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