(Bloomberg) -- A private gauge of China’s factory activity expanded for a third month in January, contrasting with weakness in official data that has spurred additional calls for government support. 

The Caixin manufacturing purchasing managers index reached 50.8 last month, the same as December’s reading and matching economists’ expectations. A reading above 50 indicates expansion and anything below that points to contraction.

“The manufacturing sector continued to improve in January, with both supply and demand increasing,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the release. “However, employment remained in the contraction zone, price levels were subdued, and deflationary pressures persisted.”

The release came after official data this week showed activity among the nation’s manufacturers contracting for a fourth straight month in January. The two surveys cover different sample sizes, geographic locations and types of businesses, with the Caixin poll generally having outperformed the official one last year.

Some economists said the official survey may paint a more realistic picture of the economy, and the divergence could stem from relatively stronger performance of export-oriented firms.

What Bloomberg Economics Says ... 

“The January Caixin PMI report failed to capture weakness in the Chinese economy in the topline print, which showed manufacturing steady and comfortably above the waterline ... But details in the January report did reinforce a key observation from the official PMI data – that domestic demand is weak.”

— Chang Shu, chief Asia economist

Read the full report here.

Confidence in the world’s second-largest economy has flagged despite efforts by the government to add stimulus, including via measures to unleash more long-term cash for banks, tighten rules on the lending of shares for short selling and broaden developer access to loans. A $6 trillion stock market rout has underscored the extent of the blow to sentiment, with those recent efforts not being enough to turn things around meaningfully. 

Along with a years-long property crisis, deflationary pressures have been cited by economists as a key challenge for growth this year. Economists expect Beijing to announce a fairly ambitious 2024 growth goal when the national legislature meets in March, though maintaining a similar rate as last year’s “around 5%” target may be difficult given a higher base of comparison.

“For real improvements in subsequent readings, we should pay more attention to the performance in demand, orders and prices,” said Liu Boyang, head of research at CNCB Hong Kong Investment Ltd. “The trend of improvement might continue in February, as fiscal policies will take more effect and stimulate relevant industry chain links.”

(Updates with analyst comment in eighth paragraph.)

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