BEIJING (Reuters) – China’s factory activity rose for the first time in seven months in February, driven by a renewed upturn in production and new orders and revived customer demand as the country shook off its strict COVID curbs, a private sector survey showed on Wednesday.
The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51.6 in February from 49.2 the month prior and beat expectations in a Reuters poll of 50.2.
The reading marks the first monthly expansion since July and the highest reading since June. The 50-point index mark separates growth from contraction on a monthly basis.
The strength in the Caixin PMI aligns with an official survey also released on Wednesday that showed China’s factory activity gained steam.
The removal of stringent COVID containment measures has helped restore business operations and client demand, sending factory output growth to the highest since June as workers recovered from infections.
New orders expanded for the first time since July and grew at the quickest pace since May 2021.
Surveyed firms also noted an improvement in foreign demand for Chinese manufactured goods, with new export orders expanding for the first time since July, providing some comfort for exporters amid slowing global economic growth.
Manufacturers pushed up charges for exported items due to higher input costs and improved demand.
The Caixin survey centres on small firms and coastal regions and includes a number of exporters.
Although staffing levels in the sector rose for the first time in nearly a year, there were signs of increased pressure on operating capacity with the backlog of work up for the second straight month.
Business confidence, however, continued to strengthen with overall optimism the highest since March 2021.
“In a nutshell for February, the economy saw a faster pace of recovery following a peak in the recent wave of COVID infections as supply and demand expanded, overseas demand surged, employment started to rebound, and logistics recovered at a faster pace,” Wang Zhe, senior economist at Caixin Insight Group, said in a note.
“But the impact of the pandemic remains far-reaching. Currently, the foundation for economic recovery is not yet solid, and it will take time to fully restore production and social order to normal.”
The annual parliamentary meeting kicking off on March 5 is expected to announce China’s 2023 economic growth target, a new economic team and policy strategy.
Nomura analysts expect Beijing to maintain its pro-growth position to ensure a rebound but they do not expect a big stimulus package to be announced, as the new government may take a more conservative stance in its first year.
(Reporting by Ellen Zhang and Ryan Woo; Editing by Sam Holmes)
