China manufacturing data mixed in January

SHANGHAI — China's manufacturing sector was boosted by strong holiday season demand for food, beverages and other consumer products in January, though export demand and other indicators remained weak, according to surveys released Wednesday.

The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose 0.2 points to 50.5 from December's figure of 50.3 in a second straight month of improvement.

November's figure had fallen well below the 50-level that signifies expansion, in the first contraction in manufacturing activity since early 2009. But a relatively early Lunar New Year holiday, in mid-January, had buoyed production in December, economists say.

The positive trend "suggests that the manufacturing sector has stabilized somewhat due to supportive fiscal and monetary policies," said ANZ Group analysts Li-gang Liu and Hao Zhou commented.

However, a competing survey, the HSBC China Manufacturing PMI — a seasonally adjusted index designed to measure the performance of the manufacturing economy — remained little changed, at 48.8 compared to 48.7 in December, suggesting a "moderate deterioration in Chinese manufacturing sector conditions," HSBC said.

A government-engineered cooling of the property sector, coupled with the slump in global demand, has helped cool growth, battering export-driven southern coastal regions where thousands of small companies have gone out of business, laying off tens of thousands of workers.

HSBC said factories continued to reduce payrolls while reducing output due to weak orders, relying when possible on stock depletion.

"This calls for more aggressive easing measures to support growth," said HSBC economist Hongbin Qu. He forecast a "tough" first quarter for 2012, with growth slowing to about 8 percent. China's expansion slowed to a 2 1/2-year low of 8.9 percent in the three months ending in December from the previous quarter's 9.1 percent.

The Logistics Federation said the most positive signs were seen in consumer goods industries such as tobacco, beverages and food processing — areas usually active around the holiday season. Areas seeing contraction included furniture, metal fabrication and smelting and other manufacturing related to construction and industrial production, the federation said.

Exports remain sluggish, with the index for new export orders down 1.7 percentage points to 46.9. Imports likewise were feeble at the same level.

The past two months of improvement indicate a "gradual stabilization of the Chinese economy," said federation analyst Zhang Liqun. But he added that "the decline in new export orders reflects the weak level of external demand. Such external factors require close attention."

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China Federation of Logistics and Purchasing (in Chinese): http://www.cflp.org.cn