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China PMI February 2021

China: Manufacturing and non-manufacturing PMIs decline in February

The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from 51.3% in January to 50.6% in February, below the 51.1% expected by market analysts. As a result, the index remained above the 50.0% threshold that separates expansion from contraction in the manufacturing sector. The reading was driven by slower growth in output and new orders. The headline reading masked differences among firms: while large enterprises continued to expand, the PMI for small and medium-sized companies indicated worsening operating conditions.

Looking at the non-manufacturing sector, the PMI stood at 51.4%, down from 52.4% in January and largely driven by a marked slowdown in the construction sector.

February’s reading—which was in line with the Caixin PMI—was likely due to some lingering Covid-19 restrictions and distortions due to the Lunar New Year celebrations falling in the month. Regarding February’s reading and the outlook for the rest of the year, Ho Woei Chen, economist at United Overseas Bank, commented:

“Both the CFLP and Caixin manufacturing PMIs have topped out in November 2020. The declines in the manufacturing and non-manufacturing PMIs were also much larger than the market’s expectation in February which further indicates a softening outlook. However, […] [w]e also look for an improvement or at least a stabilisation in the data from March to indicate that the broad economic recovery in China is still intact this year.”

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