China PMIs (Feb.) - Capital Economics
China Economics

China PMIs (Feb.)

China Data Response
Written by Sheana Yue
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The latest manufacturing surveys suggest that factory activity didn’t receive the boost we had anticipated from travel restrictions over the Spring Festival. Nevertheless, we think activity will remain fairly robust in the near-term.

Spring Festival restrictions failed to lift industry

  • The latest manufacturing surveys suggest that factory activity didn’t receive the boost we had anticipated from travel restrictions over the Spring Festival. Nevertheless, we think activity will remain fairly robust in the near-term.
  • The Caixin manufacturing PMI continued its decline in February, falling from 51.5 in January to 50.9 (the Bloomberg consensus was 51.3 and our forecast was 52.0). The official survey released yesterday also fell, from 51.3 to a nine-month low of 50.6 (Bloomberg: 51.1 and CE: 52.0). (See Chart 1.) The average of the two is now at its lowest since last April but continues to point to an expansion in industry.
  • Averaged across both PMIs, all components apart from the delivery times measure weakened slightly. (See Chart 2.) Firms continue to report the longest delivery times since factories were closed last March. This was in part due to travel restrictions which impeded delivery of inputs and was also partly a result of capacity constraints that led to slower rises in output. In fact, the output component decreased in both surveys, but remained over 50. (See Chart 3.) Meanwhile, the export orders component on both surveys are now under 50, which suggests that the recent strength of exports may be levelling off.
  • The official non-manufacturing PMI released yesterday fell by more than expected from 52.4 to 51.4, its lowest since the coronavirus hit last year (Bloomberg: 52.0 and CE: 51.8). (See Chart 4.) This was driven by the largest fall in the construction index since last February from 60.0 to 54.7 as tougher restrictions on borrowing started to weigh on the property sector. Meanwhile, the services index declined from 51.1 to 50.8. This suggests that the successful campaign to restrict travel ahead of the Lunar New Year festivities weighed on services activity last month. As a result, the official composite PMI fell to a new post-coronavirus low of 51.6, but remains consistent with an expansion in economic activity
  • The survey data suggest that manufacturing activity didn’t receive the boost we had expected as a result of workers not being able to return home for the Lunar New Year. The PMIs are seasonally-adjusted, so should take into account the usual pattern of firms’ shutdowns in the festive period, though adjustment isn’t always exact. Looking ahead, given that the surge in infections in January has been quashed, the recovery in services activity should resume before long. The big picture, supported by the latest figures, is that China’s growth remains fairly robust, but it is slowing from previously very rapid rates.

Chart 1: Headline Manufacturing PMIs

Chart 2: Manu. PMIs – Contr. to Change
(Official and Caixin simple ave.)

Sources: CEIC, Markit, Capital Economics

Sources: CEIC, Markit, Capital Economics

Chart 3: PMIs – Output and Export Orders
(Official and Caixin simple ave.)

Chart 4: Official Non-manufacturing PMI

Sources: CEIC, Markit, Capital Economics

Sources: CEIC, Capital Economics


Sheana Yue, Assistant Economist, sheana.yue@capitaleconomics.com
Mark Williams, Chief Asia Economist, mark.williams@capitaleconomics.com