Manufacturing falls to historic low in China

China's manufacturing industry

Beijing, ┬áChina’s manufacturing industry registered its worst data in February since official record keeping began in 2005, with the benchmark indicator Purchasing Managers Index (PMI) plummeting 14.3 points, the National Bureau of Statistics said on Saturday.

This is a heavy blow for analysts, who expected a drop in the PMI, but of only 4 to 5 points compared to the January data, reports Efe news.

The coronavirus crisis caused a decline in the manufacturing industry in February, far greater than that recorded in its worst reading so far in November 2008 during the global financial crisis (38.8 points).

A figure above 50 points implies growth and below that implies contraction.

For context, the average recorded in the 12 months of 2019 – the year in which the Chinese economy was affected by the trade war with the US – was 49.7 points.

In the breakdown by company size, large companies fell 14.1 points to 36.3, but medium and small companies suffered even more at 35.5 and 34.1, respectively.

The five sub-indices that make up the manufacturing PMI registered falls of between 13.2 and 23.5 integers: the production index stood at 27.8 points; that of new orders at 29.3; that of employment at 31.8; the delivery time used by suppliers at 32.1, and the provision of raw materials at 33.9.

The hit was even worse in businesses not related to manufacturing, the PMI of which had never registered a contraction since record keeping began in 2007 and went from being at 54.1 points in January to 29.6 in February after a drop of 24.5 points.

In this case, experts of the specialized website Trading Economics predicted a fall of just over 7 points.

The services sector, which represents more than half of the country’s GDP, lost 23 points in February ending at 30.1.

The NBS indicated that, in the breakdown of these businesses, only those related to financial and monetary services and capital market services remained in the expansion zone.

Meanwhile, the institution also highlighted that other sectors such as telecommunications, radio and television services, satellite transmission and Internet, software and information technology were in the contraction zone, but much higher than the average of the services sector.

A fact that highlights economic pessimism in China is the index of expected economic activity, which measures the confidence of non-manufacturing companies in future market development: it fell 19.6 points to 40.

The comprehensive PMI production index, combining manufacturing and non-manufacturing industries, also registered a drop never seen before, although in its case it only started being published in 2017. It went from 53 to 28.9 points after a 24.1 drop.

Meanwhile, China on Saturday confirmed 427 new coronavirus cases and 47 more deaths throughout the day on Friday, representing a rebound of 31 per cent in new infections compared to the previous day, while deaths on Friday exceeded 7 per cent from a day earlier.

The number of deaths so far in China stands at 2,835 and the number of confirmed cases at 79,251, the latest National Health Commission announced on Saturday.