Asia is leading the world…
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The much anticipated January reading for China’s purchasing managers’ index has confirmed expectations that Asia’s powerhouse is back into growth mode, beating analyst expectations and topping 50.
At 50.1, the official manufacturing PMI reading is above the line that separates growth from contraction and compares with analyst expectations of a reading below 50, at 49.8, per a Reuters poll.
In services, the Chinese economy was doing even better, with the January PMI reading at 54.4, compared with expectations of 52.
A separate PMI reading compiled by Caixin Global showed a contraction in manufacturing activity in January, however, at 49.2. Still, the number was slightly higher than the December reading. It suggests, however, that manufacturing activity shrank for the sixth month in a row in January, Caixin noted in its report.
Any economic activity updates from China move oil prices because of the country’s position as the top crude oil importer in the world. A recovery in economic activity was expected after the end of zero-Covid policies but analysts were split on how fast the rebound would happen.
Regardless of the pace of rebound, it seems, expectations are that the country will remain the leading factor for oil prices this year as well, with the International Energy Agency expecting half of global oil demand growth to come from China.
This will follow a year during which Beijing’s Covid policies and a real estate market crisis dampened oil demand in the world’s largest importer by some 3 percent or close to 400,000 barrels daily. This was the first year of oil demand decline in China since 1990.
“China is the key uncertainty when it comes to 2023 global energy markets,” the IEA’s Fatih Birol told the New York Times this month, adding that “how the country’s economy will perform will have massive implications for global energy markets.”
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com