China’s manufacturing contracts for 5th month, sparks calls for increased stimulus

China’s manufacturing sector recorded a contraction for the fifth consecutive month, as revealed by an official factory survey on Friday.

The manufacturing purchasing managers’ index (PMI), compiled by the National Bureau of Statistics (NBS), dropped to 49.1 in February from 49.2 in January.

This downturn intensifies pressure on policymakers to implement additional stimulus measures as factory owners grapple with dwindling orders.

The figure falls below the critical 50-mark, indicating contraction and aligning with a Reuters poll’s median forecast.

The official PMI decline may be influenced by seasonal factors, primarily the Lunar New Year, which occurred on February 10 this year.

The festivities led to factory closures as workers returned home for the holiday. Despite the official PMI contraction, a survey by Caixin/S&P Global, released shortly after, depicted a steady expansion in manufacturing activity.

Both production and new orders grew at a faster pace, highlighting an uneven economic recovery.

Chief Economist Dan Wang at Hang Seng Bank China attributed the dip in the official PMI to a sharp contraction in new foreign orders, indicating a potentially prolonged weakened demand from overseas markets.