China's factory activity contracts in January for the first time in 4 months

HONG KONG (AP) — Manufacturing slowed in China in January for the first time in four months as workers began leaving assembly lines to travel to their hometowns for Lunar New Year holidays.

The National Bureau of Statistics said its purchasing managers index, based on a survey of factory managers, slipped to 49.1 in January from 50.1 the month before. A PMI reading above 50 indicates expansion. Under 50 signals a contraction in activity.

New orders and production also contracted.

A parallel purchasing managers’ index for the non-manufacturing sector, which covers construction and services, fell to 50.2 points from 52.2 in December.

The slide in factory activity was partly due to the approach of the holidays, said Zhao Qinghe, a bureau senior statistician.

China's most important festival, this year public holidays will begin Tuesday and continue until Feb. 4. Millions of Chinese leave the cities to travel back home for a rare break with family during the holidays, which tend to distort economic data early in the year.

China’s economy grew at a 5% annual pace in 2024, hitting the government’s target thanks to strong exports and stimulus measures.

While activity slowed this month, it's likely to pick up again thanks to the government's efforts, Zichun Huang of Capital Economics said in a commentary.

“But the disappointing PMI data underscores the difficulty policymakers face in achieving a sustained recovery in growth," she said.

She noted that the PMI for construction also fell.

“This is disappointing, and suggests that fiscal support may be struggling to offset the broader pressures weighing on construction activity,” Huang said.

The outlook for exports also remains uncertain, given threats by U.S. President Donald Trump to raise tariffs on imports from China.