China's Factory Activity Shrinks for 5th Month, Raises Pressure For More Stimulus

• China's manufacturing activity contracted for a fifth straight month in February, an official factory survey showed on Friday, raising the pressure on policymakers to roll out further stimulus measures as factory owners struggle for orders.
• The official manufacturing purchasing managers' index (PMI), compiled by the National Bureau of Statistics (NBS), fell to 49.1 in February from 49.2 in January, below the 50-mark separating growth from contraction and in line with a median forecast of 49.1 in a Reuters poll.
• Seasonal factors may have affected the figure, as the Lunar New Year (LNY) fell on Feb. 10 this year and saw factories shut as workers returned home for the holiday. However, a survey by the Caixin/S&P Global released just after the official PMI showed manufacturing activity expanded steadily as both production and new orders grew faster. Taken together, the PMIs highlighted an uneven economic recovery.
• Dan Wang, chief economist at Hang Seng Bank China, said the dip in the official PMI was also due to a sharp contraction of new foreign orders. "Weakened demand from overseas seems to be a permanent, rather than temporary phenomenon" because of the economic slowdown in developed markets as well as the relocation of domestic supply chains.
• New export orders have shrunk for 11 consecutive months in the NBS manufacturing PMI, while a year-long contraction in employment in the factory sector pointed to persistent strain on businesses.
• On the other hand, the official non-manufacturing PMI, which includes services and construction, rose to 51.4 from 50.7 in January, marking the highest reading since September last year, thanks to robust activity during the LNY holidays. However, construction activity nudged down by 0.4 percentage points as property-related activity was still in contraction.

(Source: Reuters)