For the first time in nearly 20 months! This figure has risen above the critical threshold, signaling a potential shift in the trend. What does this indicate about the current situation?

On January 31, the National Bureau of Statistics Service Industry Survey Center and the China Federation of Logistics & Purchasing released the China Purchasing Managers’ Index.

Data shows that in January, the Manufacturing Purchasing Managers’ Index (Manufacturing PMI), Non-Manufacturing Business Activity Index, and Composite PMI Output Index were 49.3%, 49.4%, and 49.8%, respectively, down 0.8, 0.8, and 0.9 percentage points from the previous month, indicating a slight slowdown in economic activity.

However, the price indices released positive signals. In January, both the major raw material purchase price index and the factory gate price index rebounded, with the factory gate price index rising above the critical point (50%) for the first time in nearly 20 months. Meanwhile, new driving forces continued to expand, with the financial business activity index significantly improving compared to the previous month and the same period last year.

Manufacturing Operation Shows Fluctuations

In January, the Manufacturing PMI was 49.3%, down 0.8 percentage points from the previous month, indicating fluctuations in manufacturing operations.

Huo Lihui, Chief Statistician of the Service Industry Survey Center of the National Bureau of Statistics, said this is due to some manufacturing sectors entering the traditional off-season, coupled with still insufficient effective market demand.

Looking at the 13 sub-indices, compared to last month, the finished goods inventory index, import index, purchase price index, and factory gate price index all increased, with gains between 0.3 and 3 percentage points; while the production index, new order index, new export order index, backlog order index, procurement volume index, raw material inventory index, employment index, supplier delivery time index, and business activity expectations index all declined, with decreases between 0.1 and 2.9 percentage points.

Wen Tao, analyst at the China Logistics Information Center, pointed out that in January, despite a contraction in raw material procurement activities, the prices of bulk commodities continued to rise due to expectations of loose international liquidity, geopolitical factors, demand for industrial metals, and domestic “anti-involution” policies. As a result, the prices of raw materials in China accelerated, with the purchase price index reaching 56.1%, up 3 points from the previous month, hitting a new high since June 2024. The rising raw material prices also drove up finished product prices, with the factory gate price index at 50.6%, up 1.7 points from last month, returning to expansion territory after 19 consecutive months below 50%. Although both raw material and finished product prices increased, raw material prices rose more rapidly, which may impact corporate profitability.

“Survey data shows that over 34% of manufacturing companies reported profit declines in January, highlighting the need to pay attention to corporate profit issues,” Wen Tao said.

New Driving Forces Continue to Expand

In January, the high-tech manufacturing PMI was 52.0%, remaining above 52.0% for two consecutive months, indicating continued positive development; the equipment manufacturing PMI was 50.1%, staying in the expansion zone.

Wen Tao believes that, overall, the equipment manufacturing and high-tech manufacturing sectors are steadily improving, and the industrial structure of manufacturing continues to optimize.

From the perspective of corporate expectations, the business activity expectation index was 52.6%, remaining above the critical point. In specific industries, the production and operation activity expectation indices for sectors such as agricultural and sideline food processing, food, beverages, and refined tea have been above 56.0% for two consecutive months, reflecting strong confidence in recent industry development.

Huo Lihui believes this indicates that corporate outlook remains optimistic.

Wen Tao predicts that in February, manufacturing activity may continue to slow due to the Spring Festival holiday. As the economy and society return to normal after the holiday, driven by the “14th Five-Year Plan” deployment and the implementation of the Central Economic Work Conference, manufacturing will continue to expand steadily, with high-quality development becoming more in-depth and substantial.

Financial Business Activity Index Significantly Improves Compared to Last Month and Last Year

In January, China’s Non-Manufacturing Business Activity Index was 49.4%, down 0.8 percentage points from the previous month.

Huo Lihui stated that recent low temperatures and the approaching Spring Festival holiday affected construction activity, with the business activity index at 48.8%, down 4.0 points from last month, indicating a significant decline in construction sector confidence. The construction industry business activity expectation index was 49.8%, falling below the critical point, suggesting cautious industry outlook.

“The decline in construction sector confidence is a major factor behind the slowdown in non-manufacturing, while the service sector remains relatively stable,” said Wu Wei, analyst at the China Logistics Information Center.

The service industry business activity index slightly decreased by 0.2 points from last month, remaining around 49.5% for three consecutive months. The new orders index also declined slightly by 0.2 points, staying above 47% for two months.

Wu Wei pointed out that the data indicates stable supply and demand conditions in the service sector. Key supporting factors include strong support from the financial sector for the real economy, steady development of new driving forces, and good performance of some consumer-related services.

In January, the financial business activity index increased significantly compared to last month and the same period last year, rising above 65%; the new orders index also increased to above 60%, maintaining growth for three consecutive months.

Wu Wei said that the data shows financial activity continues to heat up. Under the guidance of moderately loose monetary policy, credit issuance and direct financing are working together, continuously improving the quality and efficiency of financial services to the real economy, maintaining strong support. Looking ahead, with ongoing optimization of the financial policy environment, financial institutions remain optimistic about future markets, and the business activity expectation index has increased for two consecutive months.