China's Manufacturing Growth Continues to Slow in February -Shanghai Metals Market

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China's Manufacturing Growth Continues to Slow in February

Data Analysis 10:33:07AM Mar 02, 2011 Source:SMM

BEIJING, Mar.1 -- China's manufacturing growth continued to slow in February, giving temporary support to the nation's fight against inflation, as the purchasing managers index (PMI) marked three consecutive months of decline.

The country's manufacturing sector PMI, a key measure of the industrial growth outlook, fell to a six-month low of 52.2 percent in February, compared with 52.9 percent in January, the China Federation of Logistics and Purchasing (CFLP) said Tuesday.

The index has now slid three months in a row but has kept above the boom-or-bust line of 50 percent for 24 consecutive months.

A PMI reading above 50 percent indicates economic expansion. One below 50 percent indicates contraction.

Analysts said the PMI slowdown in February would help China contain soaring prices.

"Despite the slowdown in February, the PMI remains within a moderate and reasonable range. And the February data suggests China's economy is gradually returning to the track of steady and sound growth," said Cai Jin, vice president of CFLP.

Cai said the February PMI of 52.2 percent suggested a corresponding economic growth rate between 9 to 9.5 percent, a pace that will help ease inflationary pressures.

According to the CFLP data, the manufacturing industry's production, inventory levels of finished goods and materials dropped by more than 1 percentage points, while manufacturers' new export orders, backlogs, imports volumes and prices rose by less than 1 percentage points.

Zhang Liqun, a researcher with the Development Research Center of the State Council, said the February PMI figure indicated that the Chinese economy may slow further in the future.

However, he said as "the PMI is still holding above the 50 percent boom-or-bust line, economic growth won't decline sharply."

The Development Research Center of the State Council is China's top government think-tank.

Economists attributed the weakening PMI data to the week-long Spring Festival holiday, which started on Feb. 2, as well as the government tightening measures.

The PMI purchasing price barometer, a sub-index that measures the cost of raw materials, went up 0.8 percentage points to 70.1 percent in February, suggesting imported inflation still lingers.

Wang Qing, chief economist for Greater China with Morgan Stanley, said China's manufacturers may soon hike the prices of their products as commodity prices in global markets have risen amid growing demand from China's manufacturing sector for raw materials.

Wang said the oil supply shortage caused by turmoil in the Middle East would add to China's inflation pressure in the months to come.

China's consumer price index (CPI), a main gauge of inflation, rose 4.9 percent year on year in January, while the producer price index (PPI), an inflation measure at the wholesale level, rose 6.6 percent in the same month.

The HSBC China Manufacturing Purchasing Managers Index, another survey released Tuesday, also dropped from January's 54.5 to 51.7 in February, which was a seven-month low.

The HSBC survey covers 400 companies, while the CFLP's monthly PMI reports measure data from 820 companies across a range of China's manufacturing sector.

 

Key Words:  PMI 

China's Manufacturing Growth Continues to Slow in February

Data Analysis 10:33:07AM Mar 02, 2011 Source:SMM

BEIJING, Mar.1 -- China's manufacturing growth continued to slow in February, giving temporary support to the nation's fight against inflation, as the purchasing managers index (PMI) marked three consecutive months of decline.

The country's manufacturing sector PMI, a key measure of the industrial growth outlook, fell to a six-month low of 52.2 percent in February, compared with 52.9 percent in January, the China Federation of Logistics and Purchasing (CFLP) said Tuesday.

The index has now slid three months in a row but has kept above the boom-or-bust line of 50 percent for 24 consecutive months.

A PMI reading above 50 percent indicates economic expansion. One below 50 percent indicates contraction.

Analysts said the PMI slowdown in February would help China contain soaring prices.

"Despite the slowdown in February, the PMI remains within a moderate and reasonable range. And the February data suggests China's economy is gradually returning to the track of steady and sound growth," said Cai Jin, vice president of CFLP.

Cai said the February PMI of 52.2 percent suggested a corresponding economic growth rate between 9 to 9.5 percent, a pace that will help ease inflationary pressures.

According to the CFLP data, the manufacturing industry's production, inventory levels of finished goods and materials dropped by more than 1 percentage points, while manufacturers' new export orders, backlogs, imports volumes and prices rose by less than 1 percentage points.

Zhang Liqun, a researcher with the Development Research Center of the State Council, said the February PMI figure indicated that the Chinese economy may slow further in the future.

However, he said as "the PMI is still holding above the 50 percent boom-or-bust line, economic growth won't decline sharply."

The Development Research Center of the State Council is China's top government think-tank.

Economists attributed the weakening PMI data to the week-long Spring Festival holiday, which started on Feb. 2, as well as the government tightening measures.

The PMI purchasing price barometer, a sub-index that measures the cost of raw materials, went up 0.8 percentage points to 70.1 percent in February, suggesting imported inflation still lingers.

Wang Qing, chief economist for Greater China with Morgan Stanley, said China's manufacturers may soon hike the prices of their products as commodity prices in global markets have risen amid growing demand from China's manufacturing sector for raw materials.

Wang said the oil supply shortage caused by turmoil in the Middle East would add to China's inflation pressure in the months to come.

China's consumer price index (CPI), a main gauge of inflation, rose 4.9 percent year on year in January, while the producer price index (PPI), an inflation measure at the wholesale level, rose 6.6 percent in the same month.

The HSBC China Manufacturing Purchasing Managers Index, another survey released Tuesday, also dropped from January's 54.5 to 51.7 in February, which was a seven-month low.

The HSBC survey covers 400 companies, while the CFLP's monthly PMI reports measure data from 820 companies across a range of China's manufacturing sector.

 

Key Words:  PMI