China's manufacturing hits seven month low in February

Thursday 20 February 2014 07.29
China's flash Markit/HSBC PMI fell to a seven-month low of 48.3 in February from January's 49.5
China's flash Markit/HSBC PMI fell to a seven-month low of 48.3 in February from January's 49.5

Activity in China's factories shrank again in February, a preliminary private survey found today.

The data reinforced concerns of a minor slowdown in the economy and spooking markets across the region.

The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to a seven-month low of 48.3 in February from January's final reading of 49.5, where a reading below 50 indicates a contraction while one above shows expansion.

The Lunar New Year festival, which began on January 31 and ran into early February, likely affected factory output as manufacturers shut shop for China's biggest annual holiday.

Some analysts cautioned against reading too much into the report, noting that it was a shorter-than-usual snapshot of activity, due to the New Year holiday, and that other indicators have been stronger.

The PMI's employment sub-index fell for a fourth month in a row to 46.9, its lowest point since February 2009, during the global financial crisis.

The jobs sub-index in the PMI is one of the few indicators that measures the health of China's labour market, an area of priority for Beijing which wants to keep unemployment low to maintain social stability.

Other analysts said the weak numbers would encourage the government to loosen monetary policy in order to keep the economy growing at 7.5%, a level many in the market believe China will try to achieve this year.