The official February manufacturing activity (PMI) report in China advanced strongly and remained in the field, indicating expansion (+52.6 points*). This result was better than expected and represented its highest reading since April 2012.
Among the report’s details, the notable rebound in the export orders component stood out, which is particularly interesting because there are concerns in the market about the possible strength of external demand. This external sector performance could have resulted from a more significant normalization of the supply chain. Similarly, the new orders component (considered an economic leading indicator) revealed significantly positive numbers, suggesting that activity could remain robust for the coming months.
Regarding the activity of the services, the numbers were also favorable (+56.3 points), where recovery is maintained beyond the festive season of the Lunar New Year. In this sense, the non-manufacturing PMI touched its highest reading since March 2021 in February. With the mix of these figures, employment conditions could continue to improve, so there could be higher household income growth and higher domestic consumption. In this context, the consensus estimates that China’s economy could grow by 1.3% in 1Q23.
From now on, markets will closely watch the development of China’s National People’s Congress, which begins on March 5, amid a government shakeup not seen in decades as Xi Jinping operates with greater control. In addition, the economic growth target for this year (5 – 6%) will be set, and national security issues will be addressed, including rising tensions with the United States.
China Manufacturing PMI
Note: **A reading below 50 points is considered contraction in the sector.Source: CNBC – National Bureau of Statistics of China