By Gina Lee

Investing.com – China’s economy in January 2022, with manufacturing output falling and the latest COVID-19 outbreaks limiting consumer spending. It was mainly small businesses that suffered the most, as a private survey found that export-oriented companies fell below the 50 mark, which is indicative of growth.

The National Bureau of Statistics released data on Sunday showing that it was at 50. Forecasts by Investing.com had predicted a 50-year figure. The index stood at 50.3 in December 2021.

The was 51.1, lower than the previous month’s reading of 52.7.

This slowdown was added to the tailwinds facing the Chinese economy, such as falling home sales and recent COVID-19 epidemics which led to travel restrictions in certain cities and lockdowns. Authorities are aiming to stabilize the economy ahead of a key political leadership meeting later in the year, with the People’s Bank of China cutting interest rates and officials pledging more fiscal support earlier in the month.

“The weak PMI indicates the policy easing measures from the government have not yet been passed to the real economy,” Pinpoint Asset Management Ltd. chief economist Zhiwei Zhang said in a note.

“We expect the government will step up policy support in coming months, particularly through more fiscal spending.”

The meanwhile, Sunday’s. was also at 49.1. Forecasts prepared by Investing.com had predicted a 50.4 reading, while December’s figure was 50.9.

Due to Lunar New Year holiday, January and February are normally low production months. In 2022, activity was also impacted by the government’s orders for steel plants to reduce output, aimed at reducing air pollution ahead of the Beijing Winter Olympics starting on Feb. 4.

Input prices rose at an unprecedented rate of 33% in the past three months, causing manufacturers to continue to face higher manufacturing costs. “That could drive the producer price index up and narrow the room for monetary policy,” China Renaissance Securities Hong Kong’s Bruce Pang told Bloomberg.

In the immediate term the economic pressure could increase, as the restricted Lunar New Year festivities will have an impact on consumption and production, but this is not likely to change, Chang Shu, Bloomberg chief Asia economist, said.

“The authorities have made a sharp pivot to increase policy support. This should cushion the slowdown, but the impact may not be discernible until late in the first quarter after holiday-related distortions in activity have subsided.”