China’s Weak PMI Goes Beyond Lunar New Year

The contraction in China’s official PMI reading has been largely blamed on the Chinese New Year holiday break, but some analysts argue that the dip is still reflective of slowing growth in the world’s number two economy.

China’s official manufacturing purchasing managers’ index fell to 50.5 in January, down from 51.0 in December data released Saturday showed. The dip in the official PMI followed a decline in China’s final HSBC PMI index last week to 49.5 in January from 50.5 in December, the first drop below 50 – the level that separates contraction from expansion – since August.

Traditionally, China’s January PMI reading is distorted by the Lunar New Year holiday as people take seven days off of work and many businesses and factories shut down. But some analysts said they weren’t convinced the dip could be entirely blamed on the holiday lull.

“We think that some part of the weakness was due to the Chinese New Year holiday. However, together with the [final] Markit/HSBC reading, it is getting clearer that the economic slowdown has begun again,” read a note from Societe Generale’s China economists.

China’s gross domestic product (GDP) expanded at a rate of 7.7 percent last year, its slowest rate since 1999 and down from 7.8 percent growth in 2012, compounding views that world’s number two economy, which had enjoyed decades of double-digit growth, is slowing.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza