China sees its manufacturing activity fading for two months now, this clearly underscores the state of the economy. The official manufacturing PMI or Purchases Managers Index for January was 49.5, according to the National Bureau of Statistics of China. The release was slightly higher than forecast by external research firms had noted. This release suggests that the Chinese manufacturing base contracted for the second-straight month. Note that a report below 50 indicates that PMI is in contraction while reports above 50 indicate expansion.
The previous month, PMI was reported at 49.3 while this month it improved to 49.5 according to the Chinese National Bureau of Statistics. This was the first time since July of 2016 that China fell into contraction or PMI. PMI is derived by a survey of businesses in that area of the economy. Services for the Chinese economy are doing much better as the January Services PMI was reported at 54.7 – which is solid expansion. This expansion helps cushion the impact of the slower manufacturing industry.
Of course the economy is being impacted by the trade war between China and the United States as tariffs and threats of additional tariffs are having negative impact on the Chinese economy with the main targets being the manufacturing industry. Autos have seen slower internal sales as well as some factories are only working at half capacity.