By Chris Oliver, MarketWatch –
HONG KONG — A closely watched gauge of Chinese factory activity rose to a four-month high in February but remained at levels that indicate modest contraction, while underlying data showed a weakening in new export orders.
The initial “flash” estimate for HSBC’s February manufacturing Purchasing Managers’ Index rose to 49.7 on a 100-point scale, and up from a final reading of 48.8 the previous month, the banking group said Wednesday.
Still, the result remained just below the 50 level that divides overall expansion and contraction.
HSBC economist Hongbin Qu said the slight uptick in the headline number may be related to factory restarts after the Lunar New Year holiday, adding that there was little to cheer in the report overall.
“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” Qu said.
He said cooling inflation would allow China’s central bank to “step up” policy easing with additional measures after lowering banks’ reserve requirements earlier this week.
Among subindexes tracked by the survey, manufacturing output rose to 50.1, up from 47.6 in January.
Data tracking new orders indicated contraction but not deterioration in the overall rate of decline.
However, conditions for new export orders took a turn for the worse, reversing from an expansion in the prior month to indicate weakening factory-purchase orders.
HSBC’s survey tracks response to questionnaires sent to managers at 420 manufacturing companies in China, with the flash estimate released Wednesday typically comprising results from 85 percent to 90 percent of respondents.
The final results of the HSBC survey, along with those of a separate, government-sponsored manufacturing PMI, are due out March 1.
