BEIJING, March 1 (Reuters) – China’s manufacturing activity expanded at the fastest pace in more than a decade in February, an official index showed on Wednesday, shattering expectations as output soared after the lifting of restrictions. COVID-19 restrictions at the end of last year.
The manufacturing Purchasing Managers’ Index (PMI) rose to 52.6 from 50.1 in January, according to China’s National Bureau of Statistics, above the 50-point mark that separates expansion and contraction of activity. The PMI came in well above an analyst forecast of 50.5 and was the highest reading since April 2012.
The world’s second-largest economy recorded one of its worst years in nearly half a century in 2022 due to strict COVID lockdowns and widespread infections that followed. The curbs were abruptly lifted in December as the highly transmissible Omicron spread across the country.
Global markets cheered the big surprise in the PMI with Asian stocks and the Australian dollar reversing earlier losses, the offshore yuan recovering and oil recovering, as investors took a more optimistic view of China’s economic outlook. .
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“The elevated PMI readings partly reflect the economy’s weak starting point heading into this year and should fall back shortly as the pace of the recovery slows,” said Julian Evans-Pritchard, responsible for the Chinese economy at Capital Economics.
“We were already expecting a quick rebound in the near term, but the latest data suggests that even our above-consensus forecast for 5.5% growth this year may prove too conservative.”
Markets expect the annual meeting of parliament, which begins this weekend, to set economic targets and elect new top economic officials.
“The good PMI readings provide a positive note for the upcoming National People’s Congress. We expect the government to put in place new supportive policies to cement the economic recovery,” said Zhou Hao, an economist at Guotai Junan International.
The official PMI came out just ahead of an upbeat private sector index from Caixin/S&P which showed rising activity for the first time in seven months.
Businesses accelerated their resumption of work and production as the effect of economic stabilization policies was felt by the sector while the impact of COVID-19 faded, the BES said in a separate statement. .
Furniture manufacturing, fabricated metal products and electrical machinery equipment saw big improvements, with production and new orders indices in these industries all above 60.0.
MIXED PERSPECTIVES
New export orders rose for the first time since April 2021, the PMI showed.
Meanwhile, China’s PMI index contrasted with more negative factory activity readings from other Asian economies for February, showing that conditions overseas were bleak.
More generally, the outlook remains mixed as the country’s major trading partners face soaring interest rates and cost pressures.
China’s manufacturing sector has been under pressure this year, with ex-factory prices falling in January, data showed last month, due to still-cautious domestic consumption and uncertain foreign demand.
Manufacturing companies have also seen a spike in purchase prices in steel and related downstream industries, the BES said.
The official non-manufacturing Purchasing Managers’ Index (PMI) rose to 56.3 from 54.4 in January, indicating the fastest pace of expansion since March 2021.
Construction activity, which is part of the official non-manufacturing PMI, recovered further to 60.2 from 56.4, partly due to higher infrastructure spending as a result. and increased funding to help developers complete stalled projects.
Services activity also continued to grow with improvements in the transportation and accommodation sectors.
On Friday, China’s central bank said the domestic economy is expected to generally rebound in 2023, although the external environment remains “severe and complex”.
The composite PMI, which includes both manufacturing and non-manufacturing activity, fell from 52.9 to 56.4.
Editing by Tomasz Janowski and Sam Holmes
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