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China's factory activity rises on expansion in output, orders: Caixin PMI

The upbeat results, however, contrasted with an official survey released earlier in the day showing factory activity contracted for a fifth straight month

China

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Chinese manufacturing activity expanded steadily as both production and new orders grew faster in February, pushing business confidence to a 10-month high even as firms remained cautious on hiring, a private-sector survey showed on Friday.
 
The upbeat results, however, contrasted with an official survey released earlier in the day showing factory activity contracted for a fifth straight month.
 
The Caixin/S&P Global manufacturing PMI nudged up slightly to 50.9 in February from 50.8 in January, surpassing analysts' forecasts of 50.6. The 50-point mark separates growth from contraction.
 
"Sustained expansion in supply and demand resulted in increased purchases, with rising stocks of raw materials and greater optimism," said Wang Zhe, economist at Caixin Insight Group.
 
 
However, Wang said the job market continued to shrink, which, along with depressed prices, indicated that "deflationary pressures persisted."
 
As the annual meeting of China's parliament approaches next week, its leaders are facing a daunting task as a clamour in markets increases for bolder policy decisions to safeguard the economy's long-term growth potential.
 
The world's second-biggest economy has been mired in a low-growth trajectory since the end of COVID curbs in late 2022, as a debt crisis in the property sector as well as low demand at home and abroad have dragged on broader activity.
 
Friday's Caixin PMI provided some bright spots, with output growing at the fastest pace since May 2023 despite an eight-day Lunar New Year break shutting most factories temporarily in mid-February. Firms attributed the strength to sustained improvement in market conditions and more orders.
 
In particular, new export business expanded for the second consecutive month due to an improvement in underlying global demand conditions.
 
Inventories of purchased items increased at the fastest pace since late-2020. In contrast, stocks of finished items fell for the first time since June last year, which was linked to the fulfilment of orders.
 
Business confidence also shot to the highest level since April last year. This, however, didn't translate to more hiring as employment fell for the sixth successive month.
 
Some firms lowered their staffing levels due to company restructuring and efforts to contain costs, and underlying data indicated that headcounts fell at intermediate and investment goods makers but rose at producers of consumer goods.
 
The Caixin survey also showed that competition for new business drove factory gate prices down for the second month, with the rate of discounting being the quickest since July 2023.
 
Beijing has been rolling out measures over the past year to shore up economic activity, and markets expect further support in coming months.
 
Authorities last week announced more steps to bolster domestic demand after a stellar performance in travel and services consumption during the Lunar New Year holidays.

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First Published: Mar 01 2024 | 9:00 AM IST

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