Caixin survey: China's manufacturers post modest gains amid rising demand, prices

China’s manufacturing sector rose modestly in February to a nine-month high, bolstered by firmer client demand and increasing prices, according to a private survey released by Caixin on Thursday.

The Caixin China General Manufacturing Purchasing Managers’ Index, an indicator of manufacturing activity, climbed to 51.6 in February from 51.5 in January, notching a peak since August last year, the survey done by financial information service provider Markit and sponsored by Caixin Media Co showed.

The index showed continuous improvement in business conditions across China’s manufacturing sector, pushing it further above the 50-point threshold separating expansion from contraction.

“This suggests that the durability of China’s economy will persist,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group.

The increase was backed by increases in output and prices, with output across the manufacturing sector rising at a modest rate due to growing new orders amid firmer client demand, the survey showed.

Total new orders placed with Chinese manufacturers grew slightly faster from January, led by consumer and intermediate goods sectors.

That may suggest an upbeat outlook for China’s economic growth, as demand generated at the beginning of the year would set the direction for the whole year, Zhong added.

Meanwhile, output prices in the sector rose for nine straight months by February, “driven by higher costs caused by more costly raw materials, especially steel, copper and chemicals”, the survey showed.

The survey results came a day after the official manufacturing Purchasing Manager’s Index — which fell to 50.3 from January’s 51.3 — was published by the National Bureau of Statistics. The private survey compiles more data from light industry and private companies, while the official survey focuses more on larger and state-owned firms.

While the larger state-owned firms posted the sharpest drop over six years due to suspension of work during the Chinese New Year holiday, private businesses kept bolstering the economy, with companies making active preparations to start work in March, Zhong said.

Alongside demand and prices, business sentiment in the sector has improved with the degree of optimism among purchasing managers hitting a 11-month high, as companies bet on improvement in global demand and new product launches, the survey showed.