China’s Manufacturing Growth Exceeds Expectations in February: Caixin Survey

Summary

• Chinese manufacturing activity showed an unexpected growth in February according to a private report.
• The Caixin Purchasing Managers’ Index (PMI) reported a rise compared to January as well as exceeding the expected forecast.
• Increased local and international orders drove up the manufacturing output.
• Although it’s the fourth consecutive month of China’s manufacturing sector growth, overall economic conditions remain disadvantaged.
• China’s recovery from COVID-related disruptions continues to be a challenge with conjectures of a lingering deflationary period and languishing economic growth over the past year.

Chinese Manufacturing Shows Resilience

As per a recent private survey, Chinese manufacturing growth surpassed the predictions for February. This trend signals some resilience within specific areas of the economy, even amid overall indications of reduced growth and activity.

Caixin PMI Indicates Expansion

The Caixin Purchasing Manager’s Index (PMI) increased to 50.9 in February, surpassing the projected reading of 50.7 and outstripping January’s 50.8 mark. A score above 50 is indicative of expansion.

Role of Manufacturing Output

Increase in local and international orders significantly elevated the level of manufacturing output, as indicated in a note by Caixin insights. This development led to the recorded expansion.

Contrasting Indications

For the fourth consecutive month, growth was observed in China’s manufacturing sector, as shown by the Caixin PMI. This is in stark contrast with the data showing manufacturing activity in contraction for an unbroken series of five months.

Survey Method Differences

The key difference between the Caixin survey and the official reading is their differing focus for businesses inspected. The Caixin survey has greater emphasis on smaller, private enterprises while the official survey concentrates on larger, government-run entities. Both surveys are utilized by investors for gaining a more comprehensive understanding of the Chinese economy.

Economic Conditions Remain Challenging

Despite the resilience detected by the private survey, Caixin’s economists have noted the persisting unfavorable economic conditions. “The economy yet contends with challenges… (such as) subdued prices on both the production and sales sides, inadequate domestic and foreign demand, and continuous employment contraction,” explained Wang Zhe, Senior Economist at Caixin Insight Group, in a note.

Recovery From COVID-19 Impact

China continues to grapple with the impact of COVID-19 disruptions from the last three years. The country faces a sustained deflationary pressure and comparatively minimal economic growth this past year, even with eased COVID-19 restrictions.

Source: https://www.pmi.spglobal.com/Public/Home/PressRelease/3f0f76ba5a8649b09b86fea155607bc7