World Economy

Chinese manufacturing activity hits 19-month low in February

Key Points
  • China's official manufacturing Purchasing Managers' Index for February was 50.3.
  • Economists in a Reuters poll had expected official PMI to come in at 51.2 in February, a tick lower than the 51.3 in January.
A Chinese employee works on bicycle parts made for sharing bicycles at a factory in Jinhua in China's eastern Zhejiang province.
AFP | Getty Images

China reported that its official manufacturing Purchasing Managers' Index hit a 19-month low in February with the Lunar New Year holidays contributing to slowing business activities.

The country's official manufacturing PMI came in at 50.3 in February, lower than a Reuters' poll of 51.2, China's National Bureau of Statistics reported. The official manufacturing PMI reading was 51.3 in January.

A reading above 50 indicates expansion, while a reading below that signals contraction.

Chinese statistics bureau official Zhao Qinghe said in a report that manufacturing in February was hit by slowing production and demand as Lunar New Year fell in mid-February this year.

During this period, factory activities slow as the plants wind down and shut for the holidays.

Even so, the data released on Wednesday still point to a "clear slowdown" in early 2018, said Julian Evans-Pritchard, Capital Economics' senior China economist in a note. There was a broad softening in demand, with new export orders being particularly weak, he added.

Official services PMI meanwhile fell to 54.4 in February from 55.3 in January.

Economists are expecting the Chinese economy to cool in 2018 after an unexpectedly strong showing in 2017 as the government cracks down on polluting industries and high debt levels.

China's official PMI gauge focuses on large companies and state-owned enterprises, while another set of readings by Caixin and IHS Markit focus on small and medium-sized enterprises — that data set for manufacturing will be released tomorrow.