Chinese manufacturing activity expanded at a slower pace in February but some economists consider the 0.7 points decline positive compared with the 3.8 points decline during last year’s lunar holidays.

However, the Markit/HSBC PMI for China suggests that the Chinese manufacturing sector is slowing down while inflation is rising. First the official China Federation of Logistics and Purchasing release:

China’s manufacturing sector purchasing managers index (PMI) fell to a six-month low of 52.2 percent in February, compared with 52.9 percent in January, the China Federation of Logistics and Purchasing (CFLP) said Tuesday.

China's PMI drops to 6-month low in February

The index has now slid three months in a row but has kept above the boom-and-bust line of 50 percent for 24 consecutive months.

Analysts said the week-long Spring Festival holiday, which started on Feb 2, and the government tightening measures led to the PMI decline. (…)

Full China Daily article

Here is how Markit sees things:

The headline seasonally adjusted HSBC Purchasing Managers’ Index™ (PMI™) fell from 54.5 to a seven month low of 51.7 in February. The latest reading was up slightly from the earlier flash  estimate of 51.5, but still  below the long-run trend of 52.3. The month-on-month drop in the index was one of the largest since the start of the series in April 2004


Manufacturing production in China continued to increase during February, although the rate of expansion eased sharply to the slowest in the current seven-month period of growth. Moreover, the latest increase was only modest, and slower than the long-run series average.

According to respondents, the weaker rise in output predominately reflected a  slowdown in overall new business growth to a six-month low. Furthermore, intakes of new export orders fell marginally in February, thereby ending a five-month period of growth. 

February data pointed to the first month-on-month decline in Chinese manufacturing employment since last October, although the pace of reduction was only marginal.

Reduced output requirements prompted firms to scale back their purchasing in February, with growth easing substantially to its weakest in six months. As a result, stocks of purchases fell for a second successive month, with the rate of depletion quickening since January.

Despite this, average vendor performance deteriorated at the joint-fastest rate in the current nineteen-month period of lengthening lead times. Panellists often linked longer delivery times to supply shortages at vendors.

Input cost inflation accelerated to a three-month high in February, with manufacturers attributing this to rising raw material and fuel costs. Prices paid for copper and steel were also reported as having risen from one month earlier. According to respondents, cost pressures emanated from domestic markets in the latest survey period. Firms continued to pass on higher costs to clients through increased output charges in February. The rate of factory gate charge inflation was substantial, and quickened to the fastest since November.


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