China Leads the Way in Economic Recovery PMI Readings Beat Expectations
The highly anticipated January readings for China’s Purchasing Managers’ Index (PMI) have revealed that Asia’s powerhouse is back in growth mode, exceeding analyst expectations and surpassing the critical 50 mark.
The official manufacturing PMI came in at 50.1, above the line separating growth from contraction and surpassing the expected reading of 49.8. The Chinese economy is even performing better in the service sector, with the January PMI reading reaching 54.4, compared to the expected reading of 52.
However, a separate PMI reading conducted by Caixin Global showed a contraction in manufacturing activity for January, with a reading of 49.2, which was slightly higher than the December reading. This suggests that manufacturing activity has decreased for the sixth consecutive month.
Any economic updates from China impact oil prices, due to the country being the top importer of crude oil in the world. A recovery in economic activity was predicted after the end of zero-Covid policies, but the speed of the rebound was uncertain.
Regardless of the pace of the rebound, China is expected to remain a significant factor for oil prices this year, with the International Energy Agency forecasting half of global oil demand growth to come from China.
China’s Covid policies and a real estate market crisis caused oil demand to decline by approximately 3 percent or nearly 400,000 barrels per day in 2020, marking the first year of oil demand decline in China since 1990.
The IEA’s Fatih Birol stated that China is the key uncertainty for 2023 global energy markets and that the country’s economic performance will have significant implications for global energy markets.