China’s factory activity rises at fastest pace since October, private survey outpaces official report

China’s factory activity accelerated in January as manufacturers accelerated production and brought forward shipments ahead of the extended Lunar New Year holiday, according to a private survey released Monday.

The Rating Dog China General Manufacturing PMI (seasonally adjusted) compiled by S&P Global was 50.3 in January, up from 50.1 the previous month and in line with analysts’ expectations of 50.3 in a Reuters poll. A value above the indicator 50 indicates expansion, and a value below it suggests contraction.

This is the highest level since October, when a private survey showed a score of 50.6.

Production accelerated last month as new orders at home and abroad increased, prompting companies to hire additional staff to cope with increased workloads and clear backlogs of orders.

The total amount of new orders increased for the eighth consecutive month, while new export orders recovered, supported by increased demand from overseas buyers, mainly in Southeast Asia.

However, according to a private survey, business confidence has fallen to its lowest level in nine months as companies worry about rising costs. Corporate expenses expanded at the fastest pace in four months, and factory prices rose for the first time since November 2024.

Metal prices in particular soared during the latest survey period, with input cost inflation reaching its highest level since September last year, the survey showed.

Yao Yu, founder of credit bureau RatingDog, said, “Going forward, if cost pressures continue despite a limited recovery in demand, profit margins will continue to be under pressure.”

Weak confidence in Chinese manufacturing could further hurt demand in coming months, said Jingyi Pan, associate director at S&P Global Market Intelligence, noting that rising geopolitical instability earlier this year may have prompted companies to bring forward production.

The Office for National Statistics said the figure was better than an official survey published on Saturday, which showed manufacturing activity contracted unexpectedly in January to 49.3, compared with 50.1 the previous month.

Although RatingDog’s private surveys sample a small group of export-oriented manufacturers, they generally paint a brighter picture than official polls that cover a broader range of companies.

Office for National Statistics officials blame the recession on a seasonal economic slowdown and weak global demand. Local media reported that some factories halted production last month to allow employees to return home ahead of the upcoming Lunar New Year.

This year’s Spring Festival holiday will be extended to nine days from February 15 to February 23 for the first time, with the Chinese government aiming to boost domestic spending on travel, tourism, food services and leisure activities during the holiday.

The two PMI readings also provided an early glimpse into how the world’s second-largest economy fared earlier this year. China’s economy hit the government’s 5% growth target last year, helped by strong exports as manufacturers ramped up shipments to markets outside the U.S. in response to U.S. tariff hikes.

But economists warn that deflationary pressures will continue, with retail sales falling to their slowest pace in three years. Fixed asset investment also recorded its first annual decline in decades, falling 3.8% last year as the deepening real estate recession and local government fiscal constraints curtailed investment.

Economic growth momentum is expected to remain weak in January, citing the fallout from the Chinese government’s consumer goods trade-in program last year and the lingering real estate crisis, Nomura China economist Jing Wang said in a note.

Last month, Chinese authorities launched a series of measures aimed at lowering financing costs for households and businesses and increasing demand for credit.

But “these measures are far from stabilizing growth,” Wang said, adding that the Chinese government “must make even more efforts in the coming months to achieve GDP growth above 4.5% annually in 2026.”

The Chinese government is expected to announce formal growth targets for 2026 at its annual parliament in March.