China factory expansion slows to 19-month low in February

[BEIJING] China's factory expansion slowed again in February as output and export orders dropped due to the Lunar New Year holidays, hitting a 19-month low, official data showed Wednesday.

The manufacturing purchasing managers index (PMI), a gauge of factory conditions, came in at 50.3 in February, the National Bureau of Statistics (NBS) said, compared to 51.3 in January.

Anything above 50 is considered growth while a figure below that points to contraction.

The indicator fell short of the 51.1 reading that analysts expected, according to a survey by Bloomberg News.

It marked a slowdown for the third consecutive month and the lowest reading since August 2016.

"The growth rate of the manufacturing industry has eased to some extent", NBS analyst Zhao Qinghe said in a statement, adding that factories had reduced output during the week-long Chinese New Year holidays.

Workers went home for the Spring Festival and prices fell due to weaker supply and demand. New export orders and imports also fell, Zhao said.

"This highlights the risk of a cyclical downturn in the global electronic supply chain and has a direct bearing on the regional trade outlook," Raymond Yeung at Australia & New Zealand Banking Group told Bloomberg.

Although Spring Festival falling in February this year distorted the data, when "averaging across the first two months of the year, the data still point to a clear slowdown in early 2018", Julian Evans-Pritchard of Capital Economics said in a research note.

Nomura's chief China economist Zhao Yang believes the data suggests "a weakening of growth momentum in the manufacturing sector, possibly led by a slowdown in property and fixed asset investment."

China has curbed activity in heavy industries in the country's northeast in an effort to reduce surplus capacity and lessen the heavy smog that typically blankets the region during the winter months.

"Looking ahead, I think the overcapacity cuts will still be a major theme this year, only that the focus might be shifted to sectors such as cement and glass from steel and coal in 2017," Iris Pang, an economist at ING Group told Bloomberg News.

AFP