Holiday Puts the Brakes on China’s Economic Recovery

China’s manufacturing grew at its weakest rate in five months in February as demand faltered and factories shut down for the lunar New Year holiday, two surveys showed yesterday.

The official Purchasing Managers’ Index, which is weighted toward state-owned enterprises, declined to 50.1, down 0.3 points from January but still above the 50 mark that separates expansion from contraction, the China Federation of Logistics and Purchasing said.

A separate index by HSBC Corp, slanted toward private and export-oriented companies, fell to 50.4 from January’s two-year high of 52.3.

While some analysts said China’s economic recovery remained in shape, others said it cast doubt about the strength of recovery.

“The index retreat is mainly out of fewer working days and slower industrial activities last month due to the Spring Festival holiday,” the federation said. “China’s economy is expanding steadily and we are optimistic about the future growth.”

Huang Yiping, an economist at Barclays, said yesterday’s data did not point to a strong recovery in growth, but a stabilization of economic activities in the coming months.

“We continue to expect some new investment projects, robust consumption and stabilizing exports to sustain growth around 8 %,” Huang said.

China’s recovery is continuing but the latest manufacturing indicator “suggests a slower pace of expansion,” HSBC economist Qu Hongbin said.

The component indexes of the official PMI showed that new orders were down 1.5 from a month earlier to 50.1 in February, input prices lost 1.7 points to 55.5, and production fell to 51.2 from 51.3.

HSBC said its measures for new orders and exports grew weakly.

Zhang Zhiwei, an economist at Nomura, said both official and HSBC PMIs cast doubt about the strength of recovery.

“We continue to expect China’s economic growth to peak at 8.2% in the first quarter, and slow to 7.3% in the second half,” Zhang said.

China’s economic growth rebounded to 7.9% in last year’s final quarter, ending a seven-quarter slowdown.

The latest figures come as hopes for a global economic recovery have been boosted by a run of upbeat data and indications from US Federal Reserve Chairman Ben Bernanke that the central bank plans no immediate change in its easy monetary policy.

China is trying to reduce reliance on trade and investment by encouraging domestic consumption, which will depress growth rates in coming years.

Many forecasters expect the rebound to peak in coming months before settling back to deliver growth of about 8% for the year, stronger than the outlook for the United States, Europe and Japan but below China’s double-digit rates of the past decade.

 

~ Shanghai Daily, March 2, 2013 ~

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