China’s factory downturn deepens in February

BEIJING • The first official gauge of China’s manufacturing sector in February showed activity contracting further, with a series of domestic holidays, the global slowdown and uncertainty from the trade war all likely playing a part.

The manufacturing Purchasing Managers Index (PMI) fell further below the 50 mark that signifies contraction, dropping to 49.2. New orders improved, while export orders declined further.

While the external front was downbeat, the overall picture in China was more nuanced. New orders and input and output prices rose, and business expectations of both manufacturing and services improved.

The non-manufacturing PMI, which reflects activity in the construction and services sectors, also fell to 54.3 compared to 54.7 in January.

“I think we still want to wait for the next month’s reading as this month’s is distorted by the holiday,” said Zhou Hao, a senior emerging-markets economist at Commerzbank AG. “Also, the economy could stabilise this month. Rising input prices suggest that there is no need to worry about deflation, so the question now rests on whether the economy has enough impetus.

New export orders slumped to 45.2 from 46.9 in the previous month, signalling continued weak demand from the global economy.

Small enterprises are still faring worse than bigger firms, with their reading falling to 45.3 from 47.3. — Bloomberg