The Manufacturing PMI posted its highest reading since 2012 after Beijing lifted COVID restrictions.
China’s manufacturing activity expanded at the fastest pace in more than a decade in February, an official indicator showed, dashing expectations as production surged after COVID-19 restrictions were lifted late last year.
The manufacturing purchasing managers’ index (PMI) rose to 52.6 from 50.1 in January, according to National Bureau of Statistics figures released on Wednesday, just above the 50-point mark that separates expansion from contraction in activity. The PMI far exceeded analysts’ expectations of 50.5 and was the highest reading since April 2012.
China, the world’s second-largest economy, posted one of its worst years in nearly half a century in 2022 due to strict coronavirus lockdowns and the subsequent spread of infections. Beijing abruptly lifted restrictions in December as the highly transmissible Omicron variant spread across the country.
Global markets welcomed the big surprise in the PMI, as Asian stocks and the Australian dollar reversed previous losses, the offshore yuan rose and oil rose as investors took a more optimistic view of China’s economic prospects.
“While we need to treat these numbers with caution as there may be significant seasonal and event factors, the overall trend still points to a strong recovery at the beginning of 2023,” said Zhu Hao, an economist at Guotai Junan International.
Markets expect that the annual meeting of China’s parliament, which kicks off this weekend, will set economic goals and elect new chief economic officials.
Good PMI readings provide a positive note for the upcoming National People’s Congress. “We expect the government to carry out more supportive policies to promote economic recovery,” Zhu said.
The official PMI was released ahead of an optimistic Caixin/S&P private sector index which showed activity picking up for the first time in seven months.
The National Bureau of Statistics said in a separate statement that companies accelerated the resumption of their work and production, as the sector felt the impact of economic stabilization policies, while the impact of Covid-19 receded.
While the manufacturing sector began to see more signs of recovery, it remained under pressure with factory gate prices falling in January on still-cautious domestic consumption and uncertain foreign demand.
The official non-manufacturing PMI rose to 56.3 from 54.4 in January, indicating the fastest pace of expansion since March 2021.
China’s central bank said on Friday that the overall domestic economy is expected to rebound in 2023, although the external environment remained “severe and complex”.
The composite PMI, which includes both manufacturing and non-manufacturing activity, rose to 56.4 from 52.9.
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