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BEIJING (Reuters) – Chinese factories’ activity increased in February at a slower pace than a month earlier, hitting the lowest level since last May and missing market expectations after brief disruptions related to COVID- 19 earlier in the year.
The official manufacturing purchasing manager (PMI) index fell to 50.6 from 51.3 in January, according to data from the National Bureau of Statistics (NBS) on Sunday, remaining above the 50 mark points that separate growth from contraction.
Analysts had expected it to drop to 51.1.
The activity of Chinese factories is normally inactive during the Lunar New Year break when workers return to their home towns. This year, the government called on workers to stay local to curb the spread of COVID-19.
Overall, China’s economic recovery has accelerated due to strong exports, pent-up demand and government stimulus measures.
The official PMI, which focuses largely on large state-owned enterprises, showed the new export orders sub-index to be 48.8 in February compared to 50.2 in January, falling back into contraction after months boosted by foreign demand.
A sub-index of small business activity stood at 48.3 in February from 49.4 a month earlier. Small businesses have been more affected by the seasonal effects of the Lunar New Year, Zhao Qinghe, an NBS official said in comments released with the data.
An employment sub-index in the official PMI stood at 48.1 in February, down from 48.4 in January as companies laid off more workers and at a faster pace.
Still, some companies in the manufacturing sector are under increasing pressure from rising labor costs and a shortage of labor, Zhao said.
Factory-gate prices in China rose in January for the first time in a year, as months of strong manufacturing growth pushed up raw material costs.
China recorded economic growth of 2.3% last year. This year, the government could avoid setting a growth target over fears that provincial economies might feel pressured into more debt, political sources previously told Reuters.
China will step up its political support for foreign trade and ensure smooth functioning supply chains, its new trade minister said earlier this week.
In the service sector, activity grew for the 11th consecutive month, but at the slowest pace in a year.
(Reporting by Gabriel Crossley; Additional reporting by Colin Qian; Editing by Christopher Cushing)
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