China factory activity worsens as record holiday hits production
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The outlook for Chinese factories remains clouded by subdued domestic demand and uncertainty around US tariffs.
PHOTO: AFP
BEIJING – China’s factory activity contracted more than forecast, according to official figures released on March 4, as the longest ever Chinese New Year holiday brought a lull in manufacturing and construction.
The official manufacturing purchasing managers’ index (PMI) fell to 49 in February from 49.3 in January, the National Bureau of Statistics (NBS) said.
That matched the lowest in fourth months and was worse than the median estimate of 49.2 by economists in a Bloomberg survey.
The non-manufacturing measure of activity in construction and services increased slightly to 49.5, compared with a forecast of 49.7. The construction PMI declined to the lowest in six years. A reading below 50 indicates contraction.
The outlook for Chinese factories remains clouded by subdued domestic demand and uncertainty around US tariffs.
The widening military conflict in the Middle East also risks causing a new disruption to global trade and could raise costs for Chinese producers.
“The figures are partly distorted by fewer working days,” said Dr Raymond Yeung, chief economist for Greater China at Australia & New Zealand Group. “Precision aside, activities are generally slowing. The geopolitical development and tariff uncertainties present additional downside risk.”
China is about to kick off annual political meetings
Investors are additionally looking to a summit between Chinese leader Xi Jinping and US President Donald Trump in the coming weeks to gauge how the bilateral relationship and trade barriers between the world’s two largest economies will evolve.
NBS statistician Huo Lihui blamed the longer-than-usual holiday for the softening manufacturing activity.
“Companies’ production and operations were affected to some extent and manufacturing activity declined,” she said in a statement accompanying the release.
Results from a private survey, which polled far fewer companies, showed a different picture.
The RatingDog China general manufacturing purchasing managers’ index rose to 52.1 – the strongest in over five years – from 50.3 in January. The private services PMI jumped to 56.7 in February from 52.3, according to statements released on March 4.
The private poll results have tended to be stronger than those from the official poll over the previous year as exports stayed resilient.
The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and export-oriented firms.
An analysis by Bloomberg Economics showed that the official survey better reflects overall industrial production, while the RatingDog poll may provide a stronger signal on exports.
The private index’s increasing volatility also risks overstating momentum shifts, the analysis found.
“Overall, February’s data shows a strong expansion driven by robust supply and demand,” RatingDog founder Yu Yao said in a statement. “Looking ahead, the sustainability of this momentum depends on persistent demand and whether confidence translates into more active hiring and investment.” BLOOMBERG
