BEIJING • While many of China’s factory workers were off the job enjoying this month’s Chinese New Year, signs emerged that demand from their global customers may be beginning to cool.
The manufacturing Purchasing Managers’ Index (PMI) fell to 50.3 in February from 51.3 the prior month, the biggest slump in five years and below the 51.1 estimate in Bloomberg’s survey.
New export orders declined for second month, while the services PMI slipped to 54.4 from 55.3, the statistics bureau said yesterday. Levels over 50 indicate improvement.
The weaker readings signal China’s economic growth and global trade may be starting to cool off, with flash PMI gauges for China’s major trade partners down slightly amid declines in Japanese and European manufacturing indexes.
The possibility of a major trade war with the US remains low, according to Grace Ng, a China economist at JPMorgan Chase & Co in Hong Kong. But industry frictions are likely to continue, she said.
“The risk is escalation of trade tension with the US,” Ng said in a Bloomberg Television interview yesterday. “China’s attitude has been that we want to come to terms and agreement with the US to address the trade front rather than confrontation.”
The US Commerce Department said on Tuesday it imposed duties on aluminium foil from China after concluding that producers there get unfair subsidies and dump the product in the American market. The ruling adds to tensions just as President Xi Jinping’s top economic advisor, Liu He, heads to Washington this week for discussions on trade.
The composite index covering services and manufacturing fell to 52.9 from 54.6. Manufacturing output dropped to 50.7 from 53.5. Factory employment declined a fourth month, to 48.1. The 44.8 reading for small businesses was the weakest in two years. The steel industry PMI fell to 49.5 from 50.9 as output and new orders both fell.
The deterioration in new export orders “highlights the risk of a cyclical downturn in the global electronic supply chain and has a direct bearing on the regional trade outlook”, said Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd in Hong Kong.
The weighted average of flash PMIs for China’s major trade partners declined to 56.7 in February from 57 in the prior month and December’s reading of 57.1, the highest since 2010, according to Bloomberg Economics. The index is a composite of US, euro-area and Japan flash manufacturing PMIs, weighted by each economy’s share of China’s exports. — Bloomberg