China’s factory activity grows at fastest pace since October, private survey shows, beating official reading

China’s manufacturing sector saw a boost in activity in January, with factories ramping up production and fulfilling orders ahead of the extended Lunar New Year holiday. The RatingDog China General Manufacturing PMI, a private survey conducted by S&P Global, rose to 50.3 in January from 50.1 the previous month. This marked the strongest level since October, indicating an expansion in manufacturing activity.

Production accelerated last month as new orders increased both domestically and abroad. Firms hired additional staff to manage the rising workload and clear outstanding orders. Total new orders expanded for the eighth consecutive month, with new export orders rebounding, driven by increased demand from overseas buyers, particularly in Southeast Asia.

Despite the positive trend in production and orders, business confidence dipped to a nine-month low as firms expressed concerns about rising costs. Corporate expenses expanded at the fastest rate in four months, leading to an increase in factory-gate prices for the first time since November 2024. Input cost inflation, particularly in metal prices, reached the highest level since September, putting pressure on profit margins.

The private survey results were more optimistic than the official survey released by the National Bureau of Statistics, which showed a contraction in manufacturing activity in January. NBS officials attributed the slowdown to seasonal factors and softer global demand. Some factories reportedly halted production in January to allow workers to return home for the Lunar New Year holiday, which has been extended to nine days this year.

The pair of PMI data provided an early indication of China’s economic performance at the beginning of the year. The country achieved its 5% growth target last year, driven by strong exports to non-U.S. markets amidst higher U.S. tariffs. However, economists have expressed concerns about persistent deflationary pressures, with retail sales slowing to a three-year low and fixed-asset investment recording its first annual decline in decades.

As China navigates through economic challenges, monitoring manufacturing activity will be crucial in assessing the country’s economic health and growth prospects. The private survey results offer a more optimistic outlook compared to official data, highlighting the importance of considering multiple perspectives when analyzing China’s manufacturing sector.