Latest PMI data from the Caixin signalled the softest improvement in operating conditions across China's manufacturing sector for five months in January. Companies signalled slower increases in new orders and output, while payrolls fell for the first time since last October. The latter was partly linked to attempts to reduce costs, as firms saw a solid increase in overall operating expenses at the start of the year. More cautious approaches were also taken in terms of purchasing activity and stocks of inputs and finished items, which all fell slightly in January. Factory gate prices rose only modestly, however, due to competitive market pressures. On a more positive note, an easing of China-US trade tensions helped to boost business confidence regarding the 12-month outlook for output. Notably, optimism about the year ahead rose to its highest level for 22 months.

The headline seasonally adjusted PMI - a composite indicator designed to provide a single figure snapshot of operating conditions in the manufacturing economy - edged down from 51.5 in December to 51.1 in January. Although remaining above the neutral 50.0 mark, the figure indicated only a marginal improvement in the health of the sector. Notably, the rate of improvement was the slowest recorded since the current upturn began in August 2019.