Chinese factory growth slips to five-month low

Business | Agencies and Kevin Xu 4 Feb 2020

China's factory activity expanded at its slowest pace in five months in January - even as the coronavirus crisis is yet to fully develop - after China's industrial profits posted their first annual decline in four years.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) eased to 51.1 from 51.5 in December, missing expectations but remaining above the 50-mark that separates growth from contraction for the sixth straight month. Analysts had expected a reading of 51.3.

The findings, which focused on small and export-oriented businesses, were more optimistic than those in an official survey released on Friday, which showed growth had stalled.

But they likely did not reflect the early impact of the public health crisis which flared in late January, which could weigh heavily on future economic growth.

China's industrial firms posted their first annual decline since profits fell 2.3 percent in 2015, as the slowest economic growth in almost 30 years and a bruising trade war with the US hit the country's factories.

Official data released on Monday showed industrial profits declining 3.3 percent on an annual basis to 6.1996 trillion yuan (HK$6.86 trillion) in 2019, compared with the 2.1 percent dip in the January-November period, the National Bureau of Statistics said.

Meanwhile, Chinese oil demand has dropped by about three million barrels a day, or 20 percent of total consumption, as virus squeezes the economy, according to sources inside the country's energy industry.

The drop is probably the largest demand shock the oil market has faced since the global financial crisis of 2008 to 2009 and the most sudden since the September 11 attacks.

China Petroleum & Chemical (0386), Asia's largest refiner, is cutting throughput this month by around 12 percent in the steepest cut in over a decade, as the coronavirus hits fuel demand and distribution, four sources said on Monday.

The state refiner is cutting throughput by around 600,000 barrels per day, roughly equivalent to 12 percent of its average daily throughput of 5 million bpd last year.

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