Macroeconomic indicators - Chinese manufacturing growth slows in January amid tightening measures

Wednesday, 09 Feb 2011
Xinhua reported that growth in China manufacturing sector slowed in January amid the government efforts to cool price pressures.
China Federation of Logistics and Purchasing said China manufacturing sector purchasing manager index fell to a five month low of 52.9% in January compared with 53.9% in December. The January figure means the benchmark index for economic expansion has remained above the boom or bust line of 50% for 23 consecutive months.
Analysts said authorities' moves to cool prices prompted the PMI decline and the economic outlook remained unclear.

Mr Zhang Liqun a research fellow with China top government think tank the Development Research Center of the State Council said the continued slowdown in the January PMI data showed economic uncertainty remained and the data would likely drop further in months to come. He said that "This showed manufacturing enterprises are facing greater pressure and more difficulty with increasing costs and shrinking orders.”
Mr He Yifeng a senior researcher who had kept tracing PMI figures with Hongyuan Securities said the January PMI data was a good sign that the economy was slowing remarkably.

China consumer price index a main gauge of inflation rose 4.6%YoY in December and the full year CPI climbed 3.3% in 2010 exceeding the central government official target of 3%. Mounting inflation pressure prompted the People Bank of China the central bank to adopt more tightening measures, including a hike in the bank reserve requirement ratio by 50 basis points on January 20.

The central government imposed tougher measures in cities where home prices are skyrocketing, such as restrictions on home purchases and an increase in the minimum down payment requirement for the purchase of a second home to 60% of the property's value.

Mr Cai Jin vice-president of CFLP said "The drop of PMI in January was remarkable, but the decline also had a positive meaning. Because the 10.3% of economic growth last year was a little too high a fall in PMI data in January was closely related to the government's macro control measures and it was helpful to tame inflation."
The HSBC China Manufacturing Purchasing Managers Index, another survey released recently however edged up to 54.5 last month from a three month low of 54.4 in December.(sourced:Xinhua)