PMI sees biggest monthly fall since May 2012

The official PMI in February dropped under the influence of the traditional Chinese New Year holidays.

China’s manufacturing activity retreated in February with the biggest monthly fall since May 2012, the National Bureau of Statistics said on Wednesday.

The official manufacturing Purchasing Managers’ Index, which measures vitality in the manufacturing sector, dropped by 1.0 percentage point in February to 50.3 from January’s 51.3, posting a largest month-on-month decline in 69 months.

The non-manufacturing PMI also dipped from the previous three-month rise, down by 0.9 from January to 54.4 this month but was 0.2 higher than the same period last year.

The general PMI, which covers both manufacturing and services industries and figures for which began to be released this year, retreated to 52.9 from January's 54.6.

A reading above 50 signals expansion, and below 50 indicates contraction. Despite the sharp decline this month, the manufacturing PMI has been in positive territory for 19 straight months.

"The fall back of PMI in February was normal for the months of Chinese Spring Festival each year, with production activities and growth in demand both slowing down." said Zhao Qinghe, a senior statistician of the bureau.

The period around the Chinese New Year is a slack season for traditional manufacturing production, as most companies suspend operations or slash production and market activities slow down, Zhao added.

The sub-index for production fell sharply by 2.8 points to 52.2, and for new orders it was down to 51.0 from 52.6 in January. Sub-indices for raw material inventory, employment and suppliers’ delivery time were still lower than 50.

Data suggests a weakening of growth momentum in the manufacturing sector, possibly led by a slowdown in property and fixed asset investment, according to Nomura.

Despite the general drop back, Zhao said that the manufacturing PMI still showed an overall expansion trend as high-tech manufacturing extended development under the government's policies which promote strategic emerging industries.

The PMI for high-tech manufacturing was 54.0 in February, higher than the 53.2 for January and the 50.3 for the whole manufacturing sector.

Services maintained steady growth, with the index for service business activity being 53.8, dipping 0.9 from last month but up 0.2 from a year earlier.

Expansion in services industries was led by retail, catering, rail and air transport, broadcasting, Internet and environment protection.

"Consumption is playing an increasingly strong role in promoting economic growth," the statistics bureau said.

Economists at Bank of Communications said in a note that the lower manufacturing PMI can be mainly attributed to seasonal reasons, but the range of the slowdown surpassed expectations.

Prices of some industrial primary and semi-finished products rose rapidly after the holidays, which may indicate a rebound in demand. Both manufacturing and non-manufacturing PMIs are expected to go up after March, according to BoCom.

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