China: Manufacturing and non-Manufacturing PMIs improve in February, but still point to downbeat conditions
The National Bureau of Statistics’ Manufacturing Purchasing Managers’ Index (PMI) rose to 50.2 in February from January’s 50.1. As a result, the index moved further above the 50.0 no-change threshold, signaling a faster improvement in business conditions compared to the previous month. The reading was driven by a recovery in new orders and a slower contraction in employment. That said, production growth slowed somewhat.
Meanwhile, the National Bureau of Statistics’ non-Manufacturing PMI stood at 51.6 in February, up from January’s 51.1. However, the new orders and employment subindices remained in contractionary territory. In contrast, the Caixin Services PMI—which polls smaller firms—slumped in February. All three PMI readings beat market expectations.
On the readings and outlook, analysts at Nomura said:
“We recommend this upside surprise not be over-interpreted, as we believe China’s economy may have weakened further in January and February, led by a worsening property sector. Looking to March, we expect the official manufacturing PMI to be little changed from its February reading at slightly above 50.0, due to factory closures during the Beijing Winter Paralympics (4-13 March), weaker demand as a result of the Covid-19 resurgence in Shenzhen and several other cities, the property downturn and slowing export growth. The non-manufacturing PMI, however, could soften to 51.5.”