China manufacturing PMI slips to 49.2 in January amid seasonal headwinds
Economists expect activity to remain subdued through February.
China’s manufacturing sector saw a reversal of its year-end momentum in January 2026q, with the official Purchasing Managers’ Index (PMI) falling to 49.2.
The figure, which dropped 0.9 points from December’s 50.1, fell short of the Bloomberg consensus estimate of 50.1.
Analysts from UOB Kay Hian attributed the softening to a combination of seasonal factors ahead of the Chinese New Year and a particularly cold winter, alongside persistent weakness in underlying demand.
Whilst the manufacturing output sub-index remained in expansionary territory at 50.6, it showed signs of weakening momentum with a 1.1-point drop MoM.
The new orders sub-index contracted to 49.2, whilst new export orders fell further to 47.8, suggesting a cooling in both domestic and international demand.
UOB also highlighted a significant decline in business expectations, which dropped 2.9 points to 52.6, indicating that firms are bracing for a period of slower activity.
Manufacturers are also facing intensified margin pressure as input costs surged during the month. The purchase price index jumped to 56.1, marking the highest reading since 2024.
Although the outdoor prices sub-index improved to 50.6, the gap between rising raw material costs and factory-gate prices points to continued margin compression for industrial firms. This cost pressure may have contributed to a sharp fall in the purchases sub-index, which dropped to 48.7.
The January data further underscored a divergent recovery path based on company size, with smaller firms bearing the brunt of the downturn. Large-sized enterprises remained the only segment in expansion, though they moderated slightly to 50.3.
In contrast, medium-sized enterprises fell to 48.7, and small-sized enterprises continued to struggle at 47.4, highlighting persistent challenges for smaller businesses amid weak demand and limited policy transmission.
The non-manufacturing sector also dipped into contraction, reaching 49.4 in January. This decline was primarily driven by a sharp contraction in the construction industry index, which plummeted 4.0 points to 48.8 as winter weather and holiday preparations halted major projects.
Meanwhile, the services PMI remained marginally below the threshold at 49.5, with new export orders for services declining to 46.9, reflecting continued softening in external demand.
Looking ahead, economists expect activity to remain subdued through February as the "holiday effect" takes full hold.
Market attention is now shifting toward the upcoming Two Sessions in March, where policymakers are expected to introduce more targeted measures to support domestic consumption and address the uneven recovery across different enterprise sizes.
