The pace of manufacturing on the mainland slowed last month in what some economists described as a temporary glitch caused by the Lunar New Year holiday that would not derail the momentum of recovery for the rest of the year. The Purchasing Managers' Index (PMI), commissioned by the National Bureau of Statistics, slipped for the first time in three months to 52 in February from 55.8 in January as the sector was disrupted by the week-long holiday. It lagged behind economists' consensus of 55.3, but remained in expansion mode as any reading above 50 indicates growth. However, the China Federation of Logistics and Purchasing, which conducted the survey of about 720 manufacturers around the country, is cautious about the industry outlook at a time when the export sector's recovery is shaky. Sluggish manufacturing activities also showed up in a PMI survey commissioned by HSBC on 430 mainland factory owners, which fell to a three-month low of 55.8 from 56.1 in January. Qu Hongbin, the bank's chief economist for China, however, was relatively optimistic and predicted the manufacturing recovery would continue in the coming quarters. 'Growth momentum for China's manufacturing sector remains strong,' he said. Referring to the government's PMI, Morgan Stanley chief economist Wang Qing said that by stripping out the seasonal factor and the negative impact of inflation in input prices, the slowdown in domestic industrial activities was 'much milder' than the headline numbers showed. He said that the input price increases were linked to international commodity prices. JP Morgan China equities and commodities managing director and chairman Jing Ulrich attributed the weaker purchasing sentiment to production overcapacity, wage pressure and restrained government spending rather than the Lunar New Year break. Labour shortages in Pearl River Delta and Yangtze River Delta industrial hubs worsened after millions of migrant workers failed to return after the holidays, prompting many plant owners to offer higher wages and better welfare. The PMI showed a 6.2-point decrease in output and new orders, but the readings remained in expansion territory of 54.3 and 53.7, respectively. Inflation in input prices continued to trouble manufacturers, particularly in chemicals, rubber and plastics, but to a lesser extent. A China International Capital Corp research report stated that slower PMIs helped release some pressure on inflation in consumer and factory-gate prices as well as on an overheating economy. This in turn reduces the need for an interest rate rise on the mainland, but the continuous recovery in manufacturing and exports will lead to an appreciation of the yuan against the US dollar sooner than expected, the China Federation said. Growth hiccup The Purchasing Managers' Index for last month fell to: 52
