By William Kazer
China's economy got off to a weak start in 2015 as a gauge of
factory activity recorded its first contraction in more than two
years in January and the usually strong services sector grew at a
slower pace.
Analysts said the data, released by the National Bureau of
Statistics on Sunday, suggested that the government would need to
consider rolling out more targeted measures to boost the economy in
the months ahead.
"The weak PMIs show that demand from the corporate sector is
still sluggish," said Ma Xiaoping, an economist at HSBC, adding
that support measures so far had only a limited effect.
China's official manufacturing purchasing managers index fell to
a weaker-than-expected 49.8 in January from 50.1 in December, its
first dip below 50 since September 2012, when it also was at 49.8.
A reading below 50 indicates contraction compared with the previous
month, while anything above that shows expansion.
The January PMI was lower than the median forecast of 50.3 by
economists polled earlier by The Wall Street Journal, though it
matched the 49.8 preliminary reading from an unofficial survey of
factory activity compiled by HSBC.
China's economy expanded 7.4% last year--its slowest pace in 24
years, weighed down by a slumping real-estate market, flagging
domestic demand and a still recovering global economy.
The government had set a growth target of about 7.5% for 2014
but is likely to lower its target for this year to around 7%.
The government has used a combination of speeded approvals for
infrastructure projects along with tax breaks and reduced red tape
to help the economy along. In November, the central bank cut
interest rates for the first time in more than two years and since
then it has used short-term credit injections into the banking
system to shore up liquidity.
But those measures have so far produced only limited
results.
HSBC's Ms. Ma said that a further decline in consumer inflation,
which so far has remained tame, could prompt the central bank to
cut interest rates again.
The January manufacturing PMI data showed weakness in its
subindexes for new orders and output, which expanded but at a
slower pace than in the previous month, while employment
contracted.
China's official nonmanufacturing purchasing managers index fell
to 53.7 in January from 54.1 in December, according to official
data also released Sunday. The result was the weakest since January
2014, when the index was at 53.4. The nonmanufacturing PMI covers
services including retail, aviation and software, as well as real
estate and construction.
The subindex for services fell to 52.9 from 53.3 in December and
the subindex for construction fell to 56.9 from 57.1. The
new-orders subindex for the entire sector fell to 50.2 from
50.5.
Grace Zhu contributed to this article.
Write to William Kazer at william.kazer@wsj.com
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