The Caixin China General Manufacturing PMI for January 2025 came in at 50.1, slightly below market expectations and down from December’s 50.5 reading. While this marks the fourth consecutive month of expansion in factory activity, it represents the slowest pace in this growth sequence. A key factor contributing to this slowdown was a decline in foreign orders for the second straight month, reflecting the ongoing challenges posed by shifting global trade policies.

Weak Employment and Rising Backlogs

One of the most concerning signals in the latest PMI data was the notable decline in employment, which dropped the most since February 2024. This increase in job cuts coincided with a rise in backlogged work for the fourth consecutive month, indicating that firms are struggling to keep up with demand despite the overall growth in production.

Output Growth and Purchasing Behavior

On a more positive note, output continued its upward trajectory, marking the 15th consecutive month of growth. The pace of this growth accelerated in line with an increase in new orders, suggesting that demand remains strong. Furthermore, companies increased their purchasing activity for the sixth month in a row, supported by better delivery times. This allowed firms to build up their inventories, signaling optimism for future production needs.

Read More: China Caixin Manufacturing PMI

Cost Stabilization and Improved Sentiment

On the cost front, input prices stabilized, as discounts from suppliers helped offset the rising costs of raw materials. Despite this, selling prices decreased at the fastest rate since July 2023. On a brighter note, overall sentiment among manufacturers improved, with Dr. Wang Zhe, senior economist at Caixin Insight Group, attributing this to the effectiveness of the policies introduced since September 2024. These measures appear to have had a positive impact on the manufacturing sector, helping businesses navigate the current global challenges.

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