China’s PMI readings eased further in February, signalling that economic growth is losing steam. However, vaccination program worldwide is sending hopes that global economic recovery will accelerate later in the year. This would benefit China which is the world’s largest exporter.
Caixin’s services PMI slipped -0.5 point to 51.5 in February. This marks the third consecutive monthly decline and the lowest reading since April 2020. Looking into the sub-indices, “new business” dropped to 51.8 from 52.9, while “new export business” fell to contraction for the first time in 4 months (at 48.8). Employment dipped -2.9 points to 47.9 in February, the lowest since April last year. Yet, inflation pressure remained relatively resilient in the sector. The “input prices” sub-index slipped -0.9 point to 55.5 last month on firm labor costs and raw material prices. The output prices sub-index only slid -0.1 point to 51.9 in the month.
The manufacturing PMI is on the verge of contraction. The headline index edged further lower to 50.9 in February, from 51.5 a month ago. This marks the lowest reading in 9 months. The sub-indices confirmed slowdown in growth momentum. For instance, “production” dropped -0.6 point to 51.9 while “new orders” fell -1.2 points to 51. Export orders stayed in the contractionary territory, although the corresponding sub-index edged -0.1 point higher to 47.5. Companies in the manufacturing sector were also cautious about employment, leading “employment’ sub-index to dropped -1.5 points to 48.1. Inflation pressure in the sector remained firm despite moderation. The “input price” index slipped -0.8 point to 58.1, while the “output price” sub-index moderated to 53.5 from January’s 54.9.
While Caixin’s surveys focus on small to micro sized firms, the government’s survey for large companies also reveals moderation in the growth momentum. Released during the weekend, the official manufacturing PMI dropped -0.7 point to 50.6, while the non-manufacturing PMI declined -1 point to 51.4. On a positive note, companies survey remained optimistic over the business outlook, anticipating that reopening of the economy will accelerate as the pandemic is under control.