China Manufacturing Sector Returns To Expansion Territory
China’s manufacturing sector expanded for the first time in seven months in February, driven by the upturns in production and new orders, suggesting a strong rebound in the first quarter following the easing of pandemic related restrictions.
At 51.6, the Caixin manufacturing Purchasing Managers’ Index rose from 49.2 in the previous month, survey results from S&P Global showed Tuesday. This was the first expansion in seven months and the score was the second-highest since May 2021.
Elsewhere, official PMI survey results from the National Bureau of Statistics also showed a strong improvement in private sector activity. The factory PMI surged to 52.6 from 50.1 a month ago. At the same time, the non-manufacturing PMI advanced to 56.3 from 54.4.
The high PMI readings partly reflect the economy‘s weak starting point coming into this year and are likely to drop back before long as the pace of the recovery slows, Capital Economics’ economist Julian Evans-Pritchard, said.
“Currently, the foundation for economic recovery is not yet solid, and it will take time to fully restore production and social order to normal,” Wang Zhe, senior economist at Caixin Insight Group said.
“In the coming period, relevant policies should focus more on increasing household income and improving market expectations,” the economist added.
The International Monetary Fund forecast China’s economic growth to rise to 5.2 percent in 2023, reflecting rapidly improving mobility, but to weaken to 4.5 percent next year before settling at below 4 percent over the medium term.
Production marked the first upturn since last August, with the rate of expansion the steepest since June 2022, S&P survey showed. The recent easing of COVID-19 containment measures and recovery of operations underpinned the growth in production.
Likewise, new business grew for the first time in seven months. Foreign demand also grew for the first time since July 2022.
Higher production requirements and improved sales led to a renewed increase in employment. Staffing levels increased for the first time since March 2022.
Purchasing activity increased at the fastest pace since June 2021 and average delivery times for inputs improved for the first time since last June.
Prices data showed that inflationary pressures remained muted in February. Input costs increased only moderately and average selling prices were lifted for the first time in ten months.
Business confidence strengthened in February with optimism the highest since March 2021.
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