BEIJING: Factory activity in China contracted to a three-year low in February as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad. The gloomy findings are likely to reinforce views that the world’s second-largest economy is still losing steam, after growth last year cooled to a near 30-year low.
Even with increasing government stimulus to spur activity, concerns are growing that China may be at risk of a sharper slowdown if current Sino-US trade talks fail to relieve some of the pressure.
The official Purchasing Managers’ Index (PMI) fell to 49.2 in February from 49.5 in January, pointing to a contraction in activity for the third straight month, according to data released by the National Bureau of Statistics (NBS) on Thursday. The 50-mark separates growth from contraction on a monthly basis.
Analysts surveyed by Reuters had forecast the manufacturing gauge would stay unchanged from January’s 49.5. China’s factory activity has been generally softening since last May.
“Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly,” Iris Pang, Greater China economist at ING, said in a note. “As such we expect March’s PMI to fall, too.”
Manufacturing output contracted in February for the first time since January 2009, during the depths of the global crisis. A breakdown of the survey’s findings showed the output sub-index fell to 49.5 from 50.9 the previous month. Manufacturers continued to cut jobs more aggressively, a trend Beijing is closely watching as its weighs more support measures. The pace of job-shedding was the fastest since December 2015.
New export orders shrank for a ninth straight month, and at a sharper rate, in the latest sign of deteriorating global demand. The sub-index fell to 45.2, the lowest since February 2009, from 46.9 in January.
But total new orders — an indicator of future activity — edged back into expansionary territory, suggesting some improvement in domestic demand. The sub-index rose to 50.6 from 49.6 in January, after falling for two consecutive months.
China watchers typically advise caution over interpreting the country’s economic data early in the year because of the timing of the week-long Lunar New Year holidays.
Many firms scale back operations or close for long periods around the holidays, which began on February 4 this year. But workers, business owners and labour activists have said that companies have shut earlier than usual as the trade war bites, with some likely to close for good. — Reuters
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