(Reuters) - Activity in China’s factories shrank again in February, a preliminary private survey found on Thursday, reinforcing concerns of a minor slowdown in the economy and spooking markets across the region.
The flash Markit/HSBC Purchasing Managers’ Index (PMI) fell to a seven-month low of 48.3 in February from January’s final reading of 49.5, where a reading below 50 indicates a contraction while one above shows expansion.
The Lunar New Year festival, which began on January 31 and covered early February, likely affected factory output as manufacturers shut shop for China’s biggest annual holiday.
Some analysts cautioned against reading too much into the report, noting that it was a shorter-than-usual snapshot of activity, due to the New Year holiday, and that other indicators have been stronger.
"Macro numbers from national statistics agencies so far painted a mixed picture, with trade growth and credit expansion above market estimates," Ting Lu and Xiaojia Zhi of Bank of America-Merrill Lynch in Hong Kong said in a note.
The PMI’s employment sub-index fell for a fourth straight month to 46.9, its lowest point since February 2009, during the global financial crisis.
The jobs sub-index in the PMI is one of the few indicators that measures the health of China’s labor market, an area of priority for Beijing which wants to keep unemployment low to maintain social stability.
Other analysts said the weak numbers would encourage the government to loosen monetary policy in order to keep the economy growing at 7.5 percent, a level many in the market believe China will try to achieve this year.
The preliminary February index, which shrank in every category except suppliers’ delivery times, showed the new orders sub-index fell below 50 for the first time in seven months, while new export orders were higher than in January, but remained below 50. The index is seasonally adjusted.
Thursday’s data is the latest sign of difficulty in China’s factories. A series of PMIs in January showed growth in China’s manufacturing and services sectors at multi-month or multi-year lows. But those disappointing PMI readings were countered by surprisingly buoyant growth in exports and bank lending, which suggested that the world’s No. 2 economy was not faring as badly as some feared.
The Markit/HSBC PMI is more weighted towards smaller and private companies than the official index, which contains more large and state-owned firms. — (Reuters)