MNI 5 THINGS: China Feb PMI Weakens After Holiday Slowdown

     BEIJING (MNI) - The following are the key points from the official China

Manufacturing Purchasing Managers' Index (PMI) for February, released on

Wednesday by the China Federation of Logistics and Purchasing (CFLP) and the

National Bureau of Statistics. 

       - Headline manufacturing PMI index significantly softened to 50.3 in

February, the lowest since July 2016, compared with 51.3 in January and 51.6 in

December, and below the 51.1 median of an MNI survey. February was still the

19th consecutive month that manufacturing sentiment remained above 50, which

divides expansion and contraction.  

*** "The decline was mainly caused by the Chinese New Year holidays, which this

year fell in the middle of the month (Feb 15-21), creating more impact than seen

in the past years," said CFLP economist Chen Zhongtao in an accompanying

statement. 

       - The production index, at 50.7, was 2.8 percentage points lower than

January, while the consumption goods manufacturing index was 2.2 percentage

points lower. The equipment and high-tech manufacturing indexes were higher than

in January. The expectations index rose by 1.4 percentage points to 58.2.    

*** Comments: The holiday disruption makes it difficult to ascertain if the

Chinese economy is indeed softening as the PMI suggested. Companies generally

optimistic, and factory activities for next month may improve. 

  - Demand was weaker. Overall new orders index decreased by 1.6 percentage

points from last month to 51.0, with the new export orders softening for a

second month, by 0.5 percentage point to 49.0. 

*** External demand is contracting, according to CFLP. About 13.6% of exporters

said they were negatively affected by the yuan's appreciation - the highest

proportion reported since last March, up by almost 2 percentage points from

January.  

       - Prices fell. Input prices grew much slower at 53.4 in February compared

with 59.6 in January, while output price growth fell to 49.2 from 51.8. However,

the spread of the two prices narrowed, indicating that pressures from raw

material costs have eased.

       - Services PMI dropped to 54.4 from 55.3 in January. It was the sixth

month that the reading stayed above 54.0, a relatively high level, showing the

service sector is sustaining a strong momentum. The expectation index of the

construction industry increased by 1.0 percentage point to 65.7, suggesting an

optimistic outlook over infrastructure investment and properties. 

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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