China’s business activity growth slows in January, sentiment positive towards 12-month business outlook

China’s business activity rose modestly in January. The Caixin China Composite PMI data hinted at a slight weakening of growth momentum throughout the nation at the beginning of this year. The Composite Output Index dropped to 52.2 in January from 53.5 in December. This shows a moderate pace of growth that was the slowest since December 2016.

The fall in the composite index coincided with subdued rises in both manufacturing and services activity at the beginning of 2017. Markedly, manufacturing firms witnessed the pace of output growth moderating from December to a four-month low. Even if services activity growth also decelerated, it stayed strong overall and similar that registered in the earlier two months. This was underlined by the seasonally adjusted Caixin China General Services Business Activity Index dropping to 53.1 in January from 53.4.

New business also rose at a subdued rate at both manufacturers and service providers in January. New orders growth throughout the manufacturing sector slowed to a moderate pace overall. New business continued to increase noticeably at service firms, in spite of the pace of expansion decelerating from that witnessed at the end of 2016. On the other hand, composite new work rose at a softer rate, though the pace of growth was the second strongest since June 2014.

Services firms recorded a faster pace of job creation, whereas manufacturing companies shed jobs a slightly faster rate. Notably, it was the most rapid rise in service sector payrolls since May 2015. In spite of goods producers registering the most noticeable fall in workforce numbers for three months, employment at the composite level steadied in January after a 19-month sequence of decline.

Sentiment towards the 12-month business outlook was solidly positive throughout both the service and manufacturing sectors in January. Moreover, improved levels of sentiment in both the sectors resulted in the Composite Further Output Index to rise to a ten-month high.