China's RatingDog manufacturing PMI in January was 50.3, with sales prices rising for the first time in 14 months

# Source: Wall Street CN

By Zhao ying

China's January RatingDog Manufacturing PMI hit a three-month high. Positive signals included growth in new orders (including export orders) and the first pick-up in employment in three months. However, business confidence fell to a nine-month low, and input costs saw the sharpest increase in four months, forcing product selling prices to rise for the first time in 14 months.

China's manufacturing sector maintained its positive momentum at the start of the year, with growth in new orders (including export orders), the first rebound in employment in three months, and the first rise in selling prices in 14 months. Nevertheless, business confidence dropped to a nine-month low.

The latest data on Monday, February 2 showed that China's January RatingDog Manufacturing PMI stood at 50.3, staying above the boom-bust line for the second consecutive month and hitting a three-month high, following the previous reading of 50.1.

The data presented a **mixed picture**: positive signs included growth in new orders (including export orders) and the first recovery in employment in three months. Yet warning signals were equally evident – business confidence slid to a nine-month low, input costs recorded the strongest gain in four months, and this pressure forced a first rise in product selling prices in 14 months. This means the manufacturing sector, while on a recovery track, is facing squeezed profit margins.

## Demand Side: Domestic and foreign orders recover modestly; new orders rise for the eighth straight month

New orders grew for the eighth consecutive month in January, with enterprises generally reporting an increase in customer interest and a higher base. Notably, export orders returned to expansion territory after contracting in December last year, with particularly strong demand from Southeast Asian clients providing external support for the manufacturing sector.

However, the RatingDog report pointed out that the overall growth rate of new orders remained modest, and some enterprises mentioned that high prices and a sluggish market environment had curbed growth momentum, indicating that the strength of demand recovery was limited.

## Production and Employment: Output accelerates, employment reverses decline and picks up

Benefiting from the growth in new business volume, production expanded at an accelerated pace, with the production index remaining in the expansion range. To meet rising business demand and clear backlogged orders, Chinese manufacturers increased employment for the first time in three months. The improvement in the employment sub-index was the main driver of the PMI expansion this month.

Purchasing activities expanded in tandem, with enterprises purchasing more raw materials and semi-finished products to meet production needs, and purchased inventories rose for the second consecutive month. In contrast, finished goods inventories fell for the third straight month, mainly due to order shipments consuming stock, reflecting a healthy destocking trend among enterprises.

## Price Pressure: Initial pass-through of costs to prices; selling prices rise for the first time in 14 months

What warrants the greatest vigilance from investors is the cost and price dynamics. Input cost inflation accelerated for the second consecutive month in January, hitting the highest level since September last year, with particularly sharp increases in metal prices.

Amid accumulating cost pressures, manufacturing enterprises raised ex-factory prices for the first time since November 2024 (14 months), with export prices rising in step at the fastest pace in nearly 18 months.

Raw material prices rose for the seventh consecutive month, with the January increase being the steepest since September 2025. The report noted that the current precious metal-driven commodity bull market is continuing and shows no signs of peaking for the time being, which poses sustained pressure on manufacturing enterprises reliant on imported raw materials.

## Business Confidence: Nine-month low sends a cautious signal

Despite multiple indicators showing the manufacturing sector maintained expansion, business confidence in January fell to a nine-month low, partly due to concerns over costs. RatingDog commented that the decline in business confidence indicated that the overall growth momentum of the manufacturing sector remained weak.

In the coming months, if cost pressures persist and demand recovery remains tepid, corporate profit margins will continue to be under pressure, and the manufacturing sector may sustain a pattern of low-growth expansion. At the policy level, attention needs to be paid to balancing **stable demand and cost reduction**. The continuation of fiscal efforts to support the "Two Priorities and Two New Initiatives" policy may consolidate the manufacturing sector's recovery momentum to a certain extent.

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