EMBARGOED China's factory activity growth slips to 9-month low- Caixin PMI - Reuters

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By Reuters Staff

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(Reuters) - China’s factory activity expanded at the slowest pace in nine months in February as weak overseas demand and coronavirus flare-ups weighed on output, adding pressure on the country’s labour market, a business survey showed on Monday.

FILE PHOTO: A worker wearing a face mask works on a production line manufacturing bicycle steel rim at a factory, as the country is hit by the novel coronavirus outbreak, in Hangzhou, Zhejiang province, China March 2, 2020. China Daily via REUTERS

The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery in China, although domestic COVID-19 cases have since been stamped out and analysts expect a strong rebound in full-year growth.

February also saw the Lunar New Year holidays, when many workers return to their hometowns, although this year saw far fewer trips amid coronavirus fears.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.9 last month, the lowest level since last May.

Analysts polled by Reuters had expected the index to remain unchanged from January’s reading of 51.5. The 50-mark separates growth from contraction on a monthly basis.

“Overseas demand continued to drag down overall demand...Surveyed manufacturers highlighted fallout from domestic flare-ups of Covid-19 in the winter as well as the overseas pandemic,” said Wang Zhe, senior economist at Caixin Insight Group, in comments released alongside the data.

A sub-index for production fell to 51.9, the slowest pace of expansion since April last year, while another sub-index for new orders fell to 51.0, the lowest since May.

Export orders shrank for the second month. Factories laid off workers for the third month, and at a faster pace, with Wang noting “companies were not in a hurry to fill vacancies.”

An index of confidence in the year ahead rose however to 63.0, the highest since October. Input and output prices continued to rise albeit at a slower pace.

“Now the major challenge for policymakers will be maintaining the post-coronavirus recovery while paying close attention to inflation,” Wang added.

Analysts from HSBC this week forecast that China’s economy would grow 8.5% this year, leading the global recovery from the pandemic.

(This story corrects to remove extraneous headline tag)

Reporting By Shri Navaratnam

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