China's factory activity stuns with fastest growth in a decade
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[March 01, 2023] By
Liangping Gao and Joe Cash
BEIJING (Reuters) - China's manufacturing activity expanded at the
fastest pace in more than a decade in February, an official index showed
on Wednesday, smashing expectations as production zoomed after the
lifting of COVID-19 restrictions late last year.
The manufacturing purchasing managers' index (PMI) shot up 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 in
activity. The PMI far exceeded 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
subsequent widespread infections. 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
perking up and oil rallying, as investors took a more optimistic view on
China's economic prospects.
"The high PMI readings partly reflect the economy's weak starting point
coming into this year and are likely to drop back before long as the
pace of the recovery slows," said Julian Evans-Pritchard, head of China
economics at Capital Economics.
"We had already been expecting a rapid near-term rebound, but the latest
data suggest that even our above-consensus forecasts for growth of 5.5%
this year may prove too conservative."
Markets expect the annual meeting of parliament, which kicks off this
weekend, will set economic targets and elect new top economic officials.
"The decent PMI readings provide a positive note for the upcoming
National People's Congress. We expect the government to roll out further
supportive policies to cement the economic recovery," said Zhou Hao,
economist at Guotai Junan International.
The official PMI came out just before an upbeat private sector index
from Caixin/S&P that showed activity rising for the first time in seven
months.
Businesses accelerated their resumption of work and production, as the
effect of economic stabilisation policies was felt by the sector while
the impact of COVID-19 receded, the NBS said in a separate statement.
Furniture manufacturing, metal products and electrical machinery
equipment saw big improvements, with production and new orders indexes
in these industries all above 60.0.
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Workers direct a crane lifting ductile
iron pipes for export at a port in Lianyungang, Jiangsu province,
China June 30, 2019. REUTERS/Stringer
MIXED OUTLOOK
New export orders rose for the first time since April 2021, the PMI
showed.
At the same time, China's PMI contrasted with more downbeat factory
activity readings from other Asian economies for February, showing
conditions abroad were sluggish.
More broadly, the outlook remains mixed as the country's major
trading partners deal with surging interest rates and cost
pressures.
China's manufacturing sector had been under pressure this year with
factory-gate prices falling in January, data last month showed, due
to still cautious domestic consumption and uncertain foreign demand.
Manufacturing companies have also seen surging purchasing prices in
steel and related downstream industries, the NBS 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, picked up further, standing at 60.2 from
56.4, partly due to the resulting boost to infrastructure spending
and increasing financing to help developers complete stalled
projects.
Services activity also continued to rise with improvements in the
transportation and accommodation sectors.
On Friday, China's central bank said the domestic economy was
expected to generally rebound in 2023, although the external
environment remained "severe and complex."
The composite PMI, which includes both manufacturing and
non-manufacturing activity, rose to 56.4 from 52.9.
(Editing by Tomasz Janowski and Sam Holmes)
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