China’s Factory Activity Tops Decade High, Boosting Recovery

Bloomberg News
·3 min read

(Bloomberg) -- China’s manufacturing activity recorded its highest monthly improvement in more than a decade in February as factories reopened after the Lunar New Year holiday, giving more support to an economic recovery that has so far relied heavily on retail and services.

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The manufacturing purchasing managers’ index rose to 52.6 last month from 50.1 in January, the National Bureau of Statistics said Wednesday, beating the median estimate of 50.6 in a Bloomberg survey of economists. It was the highest reading since April 2012.

The non-manufacturing gauge — which measures activity in both the services and construction sectors — increased to 56.3 from 54.4, better than a projected improvement to 54.9.

A reading above 50 represents expansion from the previous month, while anything below indicates contraction.

February data offer the most complete picture yet for how China’s economic recovery is shaping up, as many people returned to work following the holiday break and as a wave of Covid infections subsided. The government’s proclamation that Covid is “basically over” has spurred more travel and spending as movement curbs and other restrictions were removed.

China’s economy continued to continued to recover in February thanks to an acceleration of activity and the resumption of production as the impact of a Covid wave subsided, said Zhao Qinghe, senior statistician at the NBS. Measures to stabilize growth in the country have also started to take effect, Zhao added.

  • Manufacturing output improved to 56.7 in February from 49.8

  • New orders rose to 54.1, the highest since September 2017

  • A sub-index of new export orders reached 52.4, highest since March 2011

  • A gauge measuring suppliers’ delivery times hit 52, returning to expansion for the first time since July and reaching the highest since December 2007

  • A gauge measuring manufacturing employment rose to 50.2, the first expansion in two years

  • The non-manufacturing employment sub-index was at its best since August 2018

The CSI 300, China’s benchmark stock index, rose 0.3% following the PMI data release, erasing earlier losses and outperforming a broader Asian equities gauge. The offshore yuan also improved, gaining much as 0.2%. The onshore yuan steadied. The yield on 10-year government bond yield held firm at 2.91%.

Private figures already showed some signs of recovery as road congestion in major cities increased, subway ridership returned to pre-pandemic levels and restaurant and mall spending rose.

The recovery so far has been uneven, though. While the services sector saw a big jump in activity in January, spending on big-ticket items like homes and cars has remained weak. Factory output has also been slow, as Lunar New Year holiday closures muddled the data. Slowing exports and a muted recovery for domestic industrial demand have also weighed on manufacturing activity.

Top leaders have pledged to prioritize growth this year, placing an emphasis on the role that domestic demand will play in driving the recovery. The People’s Bank of China said in its latest monetary report that it would provide “sustainable” support for the real economy and refrain from using “flood-style” stimulus.

Market watchers should be able to get more clues on China’s economic blueprint Sunday when policymakers gather for the annual National People’s Congress. It’s at that event where Premier Li Keqiang will lay out his last government work report detailing the main economic goals for the year.

--With assistance from Shikhar Balwani and Wenjin Lv.

(Updated with additional context and sub-indexes.)

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