China manufacturing gauge falls to lowest level in five years in February
Output hit by Lunar New Year holiday and drop in export orders, analysts suggest
China’s official manufacturing gauge fell the most in five years in February as Lunar New Year holiday closures curbed output and export orders declined.
The manufacturing purchasing managers index fell to 50.3 from 51.3 the prior month, missing the 51.1 estimate in Bloomberg’s economist survey.
The non-manufacturing PMI slipped to 54.4 from 55.3 the prior month, the statistics bureau said on Wednesday. The composite index covering both services and manufacturing stood at 52.9, versus 54.6 in January. Numbers above 50 indicate improving conditions.
Top officials are gathering this week to potentially reshape the government, including top economic roles, and repeal presidential term limits to allow Xi Jinping to rule indefinitely. Policymakers also have been intensifying overhauls to address pollution and debt and are likely to unveil new economic objectives next week at an annual legislative meeting.
“This is the second month we see a decline in new export orders,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group in Hong Kong. “This highlights the risk of a cyclical downturn in the global electronic supply chain and has a direct bearing on the regional trade outlook.”
China’s week-long Lunar New Year holiday often distorts data for January and February as the accompanying factory shutdowns and office closures fall at different times each year. This year’s national holiday was from February 15 to 21.
New export orders fell to 49, declining for a second month. Manufacturing output dropped to 50.7 from 53.5. Factory employment declined for a fourth month, to 48.1. The steel industry PMI fell to 49.5 from 50.9 as output and new orders both deteriorated.
“The holiday effect is definitely a key reason,” said Iris Pang, an economist at ING Groep in Hong Kong. “Combining the first two months’ data, it’s still a solid start to the year. Looking ahead, I think the overcapacity cuts will still be a major theme this year, only that the focus might be shifted to sectors such as cement and glass from steel and coal in 2017.”