China's Caixin Manufacturing PMI surprises positively in Feb

China's Feb Caixin manufacturing PMI came at 51.6 vs 51.3 expected and 51.5 last, with the operating conditions having improved to the strongest levels in six months.

Summary

Business conditions continued to improve across China’s manufacturing sector in February. Although growth in production softened from that seen in January, total new work expanded at a slightly faster pace. Meanwhile, companies continued to shed staff as part of efforts to reduce costs, which contributed to a further rise in the level of outstanding work. Although the rate of input price inflation eased further in February, it remained sharp overall and remained much stronger than that seen for output charges. Business sentiment remained strongly positive in February, with the degree of optimism reaching an 11-month high.

Adjusted for seasonal factors, including the Chinese New Year, the headline Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – edged up to 51.6 in February, from 51.5 in January, to signal a further improvement in the health of the sector. Though only modest, the latest reading signaled the strongest improvement in operating conditions for six months.

Manufacturing output in China continued to rise in February, albeit at a modest pace that was slightly softer than seen at the start of the year. According to panelists, production volumes rose due to greater amounts of new work. In contrast to the trend for output, growth in new orders quickened since January. This was despite new export sales rising to the softest extent for three months.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) for February stood at 51.6, up slightly from the previous month. Within the headline composite index, the output and employment indices subsided, and the new orders index was up slightly, reflecting stable demand that was slightly stronger than output. Under those conditions, the index for output prices stopped declining and rose slightly, and the input prices index came down at a gradual rate.”