Chinese manufacturers’ 2nd month of contraction
Print Edition
China’s manufacturing activity may show contraction for the second consecutive month after a preliminary survey reading for February fell to a seven-month low.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of the industrial sector’s vitality, dropped to 48.3 from January’s final figure of 49.5, HSBC Holdings plc and research firm Markit said yesterday.
A reading below 50 is contraction, and the latest figure marks the fifth straight month of decline.
Qu Hongbin, HSBC’s chief economist for China, said the index moderated further as new orders and production decreased, reflecting renewed destocking activities. “The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening,” Qu said. “We believe Chinese policy-makers should and can fine-tune policy to keep growth at a steady pace in the coming year.”
The component indexes showed that production eased to 49.2 in February from 50.8 a month earlier, the first time it had dropped below the threshold since last July. New orders fell by 2 points to 48.1, also the lowest since July.
However, new export orders picked up 0.9 points to 49.3 in February, reversing three consecutive monthly declines, thanks to an upturn in the global economy.
Zhu Haibin, chief economist at JPMorgan China, said the HSBC PMI came in much weaker than expected, and it reinforced the trend of softening growth momentum since the fourth quarter of last year.
China’s economy showed signs of moderation in the past few months. But the latest set of figures pointed to surprisingly good trade, sufficient credit, low inflation and more foreign direct investment at the start of 2014.
Exports jumped 10.6 percent in January, up significantly from the rise of 4.3 percent in December. Money supply expanded 13.2 percent last month, while inflation growth remained unchanged at 2.5 percent. Foreign direct investment also surged more than 16 percent, a reflection of strong investor confidence in the country’s economic outlook.
Zhu said he expected the overall economy to continue on a moderating trend in the first half of this year as authorities beef up efforts to restructure the economy, curbing excess capacity and containing financial risks. “For the year as a whole, we look for relative stable consumption growth, moderate improvement in exports,” Zhu said.
“But such good news will be more than offset by a slowdown in fixed investment which can be attributed to lingering manufacturing overcapacity, tighter local government financing conditions and a slowdown in the housing market.”
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