Econintersect: Following the preliminary Flash reading for the HSBC PMI which showed a sharp decline for February from the January reading, the modest decline of the official government reported PMI comes as no surprise. The official number for February came in at 50.1, down from 50.4 in January. The HSBC PMI final reading came in at 50.4, unchanged from the preliminary reading last week. Numbers above 50 indicate expansion and below that level, contraction.
GEI News last week said:
The data may have been distorted because of the Chinese New Years holiday (one full week) which fell in February this year. In 2012 it came in January.
This was addressed by Simon Rabinovitch tonight in the Financial Times:
...the PMI is a survey that measures sentiment rather than actual activity, economists say the holiday has only a limited impact on the numbers. Moreover, the national statistics bureau adjusts the index to account for seasonality so the final reading should be a fairly good reflection of the state of the manufacturing sector.
Econintersect was unable to access the relevant portion of the web site of the National Bureau of Statistics of China as this was written. The home page is here.
Following is the press release from Markit:
After adjusting for the strong seasonal factors associated with the Spring Festival, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 50.4 in February, down from 52.3 in January, signalling a marginal strengthening of operating conditions in the Chinese manufacturing sector. The PMI has now posted above the 50.0 no-change mark for four successive months.
Output also expanded for the fourth month in a row in February. That said, the rate of expansion eased from January and was marginal. New orders rose for the fifth successive month and at a modest pace. New export orders also increased, though at a fractional rate. Anecdotal evidence suggested export growth was due to increased demand in Europe, Japan and the US.
The level of outstanding business at manufacturing plants declined in February, following a marginal increase in January. That said, the rate of depletion was only slight. Employment levels increased for the third month in a row. The rate of job creation was fractional, with a majority of panellists (nearly 89%) reporting no change.
Vendor performance improved in February. This was the first time delivery times have shortened since last September. The rate of improvement was marginal, and anecdotal evidence suggested fewer orders were being placed at vendors.
Average input costs rose for the fifth month in a row in February. Despite easing from January, the rate of inflation was marked overall, with more than one-in-ten panellists recording increased input costs. Higher raw material costs were said to be the main driver of inflation. Output charges rose at a modest pace in February. Average tariffs have now risen for the past three months, with a number of firms linking inflation to both the passing-on of higher raw material costs and increased client demand.
Input buying increased for the fifth successive month in February. However, the rate of growth eased from January and was modest, the weakest in four months. The rise in purchasing activity was generally associated with new order growth. Stocks of purchases, meanwhile, fell for the first time in four months, and at a modest pace.
Inventories of finished goods fell for the fifth month in a row in February. That said, the rate of reduction continued to be marginal, and linked to increased use of current stocks by a number of survey respondents.
Commenting on the China Manufacturing PMI™ survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:“The final February HSBC manufacturing PMI suggests a slower pace of expansion. But China's recovery continues on improving domestic demand conditions and the labour market. The pace of ongoing recovery is mild, implying no need for the PBoC to tighten policy any time soon.”Key points
- Slight expansion of output
- Total new orders increase at modest pace
- Suppliers’ delivery times improve for the first time since last September
Sources: Markit, HSBC.
- Operating conditions improve in February, albeit marginally (Markit Economics, 01 March 2013)
- Oh-Oh! China Manufacturing Just Barely Growing (GEI News, 25 February 2013)
- China’s manufacturing growth slows (Simon Rabinovitch, Financial Times, 01 March 2013)