Asia Briefing: Chinese New Year a bit of a damp squib due to economy and lack of fireworks

The Chinese New Year holiday is still ongoing – it runs until St Valentine’s Day on February 14th, and most companies are still shut or running on a skeleton staff, but some economic data is trickling out.

Like the skies above Beijing this Lunar New Year, there is a bit less of a bang about.

The country’s official purchasing managers’ index (PMI) for January was released while the country was still celebrating the start of the Lunar New Year, but the data did not chime with the festive event.

The index fell from 51.0 in December to 50.5, taking the PMI to its lowest level since July. The fall was led by the new orders component, which slid from 52.0 to 50.9.

According to the PMI's compilers, January's manufacturing slowdown was caused by the Chinese New Year holiday, which led to factory shutdowns towards the end of the month.

Fireworks

However, while people were on holiday, their normal enthusiasm for fireworks was absent. Beijing is like a war zone on the night of Chinese New Year, but this year, fireworks sales in

the city slumped a fizzling 37.7 per cent, as people declined to light their Catherine wheels and sprockets amid worries about worsening the city’s air pollution.

Fireworks are supposed to fend off spirits and bad luck and hopefully bring in a more conducive investment atmosphere.

All in all, local residents bought 195,000 boxes of fireworks between Lunar New Year's Eve on January 30th and February 4th, the Beijing municipal public security bureau said in a statement.

Public anger

In the run-up to the holiday, authorities and environmentalists called on residents to cut spending on fireworks, as severe smoggy weather has become a constant source of public anger and complaints.

"We anticipate the upcoming January data release to show that economic momentum may have softened slightly, due in part to Chinese New Year (CNY) distortions," said Wang Tao, an economist at financial services firm UBS.

However, she points out that the Statistics Bureau will not be reporting most January and February activity data – property sales and construction, and retail sales – until later in March.

“January’s official PMI softened slightly, though we believe this is largely a reflection of CNY distortions. A relatively warm winter likely helped to keep food prices soft and power consumption weaker in January,” she added.