China’s private manufacturing PMI edged higher in January, but rising costs and weak confidence point to a fragile and uneven recovery.
Summary:
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China’s private-sector manufacturing PMI edged higher in January, signalling a second straight month of modest expansion.
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Output and new orders improved, with overseas demand—particularly from Southeast Asia—providing support.
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Employment rose slightly and backlogs eased, pointing to marginal operational improvement.
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Cost pressures intensified, pushing factory-gate prices higher for the first time in over a year.
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The private PMI contrasts with weaker official PMI data, highlighting a still-fragile and uneven recovery.
China’s manufacturing sector showed tentative signs of improvement at the start of 2026, according to private-sector PMI data, though the recovery remains shallow and increasingly challenged by rising cost pressures and subdued confidence.
The RatingDog China General Manufacturing PMI rose to 50.3 in January, up from 50.1 in December, remaining just above the 50 threshold that separates expansion from contraction. While the reading points to continued growth for a second month, the pace of improvement was modest and broadly consistent with a fragile recovery rather than a strong rebound.
Production expanded at a slightly faster rate as manufacturers reported higher new business inflows. Demand conditions improved marginally, supported by a renewed rise in export orders following a contraction in December. Survey evidence pointed to firmer demand from Southeast Asian markets, helping to offset still-soft conditions at home. Total new orders have now expanded for several consecutive months, though growth remained limited, with some firms citing elevated prices and weak underlying market conditions as constraints.
Manufacturers responded to rising workloads by increasing staffing levels for the first time in three months. Although employment gains were modest, the increase in workforce capacity, alongside efficiency improvements, helped reduce outstanding work for the first time since mid-2025. Purchasing activity also strengthened as firms replenished raw materials and semi-finished goods, leading to a second consecutive rise in input inventories. In contrast, stocks of finished goods continued to decline as companies focused on fulfilling existing orders rather than building inventories.
Supply-chain conditions were broadly stable, with delivery times unchanged. However, inflationary pressures intensified. Input costs rose at their fastest pace in four months, driven largely by higher metals prices amid a broader commodities upswing. As a result, manufacturers lifted output prices for the first time since November 2024, with export charges also increasing at the quickest pace in around 18 months.
Despite these improvements, business confidence weakened. Sentiment fell to a nine-month low as firms expressed concern over rising costs and uncertainty around the broader economic outlook. The softer confidence reading reinforces the message that momentum remains fragile.
Crucially, the private PMI stands in contrast to official PMI data from China’s National Bureau of Statistics, which showed both manufacturing and non-manufacturing activity slipping into contraction in January. The divergence underscores the uneven nature of China’s recovery, with pockets of export-linked resilience sitting alongside weak domestic demand and cautious consumers.
Taken together, the data suggest China’s manufacturing sector is stabilising rather than accelerating. Without a stronger demand recovery or more decisive policy support, rising cost pressures risk squeezing margins and limiting the durability of the upturn.
This article was written by Eamonn Sheridan at investinglive.com.