China’s Official Manufacturing Purchasing Managers’ Index (PMI), a statistical tool that measures the level of business activity in an economy, declined to 50.6 in February from 51.3 in January 2021.
Latest data shows that February saw the slowest pace of factory output growth since China’s post-lockdown recovery began in May 2020.
China is the world’s second-largest economy after the United States of America, thus its financial health mirrors that of the global economy.
The Caixin Manufacturing Purchasing Managers’ Index (PMI), a tool that indicates the state of China’s manufacturing business, was down to 50.9 from 51.5 in January 2021.
The official non-manufacturing PMI, which measures activity level in the service and construction sectors, fell to 51.4 from 52.4 in January.
Since last spring, China’s economic recovery continued in February, but at a slower-than-expected pace, with all significant sectors posting their lowest growth rates.
What lowered the February PMI
The February 2021 data covers the Lunar New Year holiday period, a period where economic activity typically slows down.
February’s slowed pace of activity is attributed to a spike in COVID-19 infections in northern China in January, especially in the service sector.
This is after the state told workers to stay home for the holidays to avoid spreading infections.
Pandemic drives PMI tp lowest level in February 2020
China’s PMI hit a record low of 29.6 in February 2020 at the pandemic lockdowns height.
The non-manufacturing index hit the lowest of 35.7 reported in February 2020.
Any PMI readings that are above 50 indicates growth in sector activity, while a reading below 50 shows a shrink in business activity. Thus, the higher the PMI above the 50 levels, the faster the expansion in sector activity.
In the February survey, 36.2% of companies said their labour costs were high, and 18.3% reported experiencing a shortage of labour supply, both of which were at the highest level of recent times.
Consumer spending was up
While a slower pace of expansion was noted in China’s service sector activity, consumer spending related-sectors grew in February.
The business activity indices of the retail, catering, entertainment and other sectors closely related to household consumption were all in the expansion range and higher than the previous month, with business activities relatively active.
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