China’s manufacturing activity slows for fifth consecutive month

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China’s manufacturing activity edged lower in February and was down for the fifth consecutive month, reflecting sluggish momentum in the world’s second-largest economy as Beijing prepares to announce its annual growth target at next week’s meeting of its rubber stamp parliament.

The country’s official manufacturing purchasing managers’ index released on Friday was 49.1 for the month, slipping from a reading of 49.2 in January. A reading below 50 marks a contraction from the previous month.

The consistent weakness in the PMI — which has been below 50 every month since March except September — will add pressure on policymakers to announce more stimulus. The Chinese Communist party leadership body, the politburo, this week held a meeting in which it called for “proactive fiscal policy” to “be appropriately intensified”.

The non-manufacturing index, which covers services and construction, was 51.4 — up from 50.7 in January, according to the National Bureau of Statistics.

Analysts expect Beijing to announce a growth target at next week’s annual meeting of the National People’s Congress of about 5 per cent. This would be the same as last year’s figure, which was the lowest in decades.

But it would be harder to achieve this year because of the absence of a low base effect from the coronavirus pandemic that flattered growth in 2023.

Policymakers are grappling with a multiyear slowdown in the property sector, which they are trying to offset by focusing on high-end manufacturing and infrastructure investment.

“We must vigorously promote the construction of a modern industrial system and accelerate the development of new productive forces,” the politburo said on Thursday, according to state news agency, Xinhua.

But although consumer demand has picked up, with millions travelling during the lunar new year holiday this year, confidence remains relatively low, analysts said.

Prior to release of the data, Nomura chief economist Ting Lu said economic indicators in January and February taken together should show a fuller picture of the state of China’s economy.

“Major growth indicators are likely to show a broad-based slowdown in their year-on-year growth rates in January-February from December last year, as the base effect due to the exit wave of Covid in late 2022 subsided,” he said.