New | China's factory sector shrinks for first time in more than 2 years, PMI survey shows
Pressure builds for more easing measures after PMI survey reveals the key sector shrank last month for the first time in more than two years
The mainland's factory sector unexpectedly shrank for the first time in more than two years last month and firms see more gloom ahead, an official survey showed, raising expectations that policymakers will take more action to forestall a sharper slowdown.
The official purchasing managers' index (PMI) fell to 49.8 in January, the National Bureau of Statistics said yesterday, a low last seen in September 2012 and a whisker below the 50-point level that separates growth from contraction on a monthly basis.
The December level was 50.1, and a Reuters poll predicted a better result, 50.2 for January. Only one of 11 economists in the poll predicted a January contraction.
"Most sub-components showed signs of cyclical slowdown," said Goldman Sachs economists led by Yu Song. "The fall in the official PMI is consistent with our expectations that first-quarter growth will likely be weak. The likelihood of further loosening measures has increased further."
Some economists said the January reading was especially downbeat as it suggested that factories did not enjoy a usual spike in business before the annual Spring Festival holiday, which falls in mid-February this year.
"The output sub-index in the PMI fell by 0.5 point to 51.7 points, indicating that industrial production remained weak," ANZ economist Liu Li-Gang said.
The downturn has also broadened into the mainland's burgeoning services sector. A separate official services PMI, also released yesterday, showed growth in the sector cooled to a one-year low last month.