China’s factory activity expanded at its fastest pace in three months to 50.8 in February, a private-sector survey showed on Monday, as millions of migrant workers returned to work after an extended Lunar New Year holiday.
The seasonally adjusted Caixin/S&P Global manufacturing purchasing managers’ index beat Reuters poll forecast of 50.3, also accelerating from 50.1 in January and 50.5 last December.
The private-sector manufacturing PMI has stayed above the 50 threshold that separates expansion from contraction since last October.
This private survey reading on Monday followed the official manufacturing PMI released on Saturday, which also showed that China’s February factory activity expanded at its fastest pace since November.
The official PMI rose to 50.2 in February from 49.1 in January, according to the National Bureau of Statistics. The non-manufacturing PMI, which includes services and construction, also climbed to 50.4 from 50.2 in January.
The figures came as economists flagged that fresh U.S. tariffs could pressure the country’s manufacturing activity — which accounted for a quarter of China’s GDP last year — and dent the role of exports as a key driver of growth this year.
In February, new export orders grew at the fastest rate since last April, according to the Monday survey, as “demand strengthened from foreign clients.”
The stronger external demand for Chinese manufactured goods could be due to U.S. importers continuing to front-run tariffs in anticipation of even higher levies, Zichun Huang, China economist at Capital Economics, said in a note.
U.S. President Donald Trump last week announced to impose additional 10% tariffs on Chinese goods — on top of the 10% he levied on China on Feb. 4. Trump had threated 60% tariffs on China on his campaign trail.
The additional tariffs are scheduled to take effect on March 4, coinciding with a high-profile annual gathering in Beijing where Chinese authorities are expected to unveil economic targets for 2025 and fresh policy support.
While attention is now on potential countermeasures from Beijing, investors also await more government details on a broad stimulus plan to prop up the slowing economy, including ramped-up fiscal spending to boost domestic demand and fend off persistent disinflationary pressures.
Patchy recovery
At the upcoming parliamentary meetings, China’s leadership is expected to acknowledge a significant softening in domestic demand while revealing highly anticipated details on fiscal stimulus aimed at shoring up growth in the face of heightened U.S. trade tensions.
While a combination of fiscal support and “tariff front-running” helped China’s economy regain some momentum in February, the overall growth in this quarter is likely to slow, Capital Economics’ Huang said.
“Unless the leadership unveil greater-than-expected stimulus at the National People’s Congress, it is hard to see how a slowdown can be avoided this year,” Huang said.
Plagued by lackluster domestic consumption, output prices at factories have remained under pressure, particularly consumer and investment goods that experienced sharper price declines, according to the Monday survey.
Squeezing that profit margin further, costs for copper and certain chemical products have edged higher, the survey showed.
Employment in the manufacturing sector also slumped to a near five-year low, as manufacturers continued to prioritize cost reductions, particularly among consumer goods producers.
Source: CNBC