Chinese manufacturing is in retreat for the first time in six months, according to British banking giant HSBC. The purchasing managers’ index (PMI), which tracks manufacturing activity in workshops and factories, fell from a December reading of to 50.5 to 49.5 in January. That also was a tick down from the preliminary 49.6 reading for January. Any reading below 50 signals a contraction.

The press release said:

The deterioration of the headline PMI largely reflected weaker expansions of both output and new business over the month. Firms also cut their staffing levels at the quickest pace since March 2009.

In addition, new export orders fell for the second straight month.

But the report also cautioned against reading too much into the numbers at this time of year, because year-to-year shifts in the timing of Chinese New Year make seasonal adjustment less accurate. Shops, offices and factories across the country are largely shut down during the week-long Lunar New Year holiday.

In 2013, Chinese economic growth slowed to its lowest level since 1999. Any further contraction in manufacturing would be fresh evidence of an economic slowdown in China. The outlook for China could be key to stabilizing emerging markets, according to some analysts. Emerging markets have been crushed by an outflow of foreign funds as the U.S. Federal Reserve winds down its monetary stimulus.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.