Thr Caixin manufacturing PMI survey suggest manufacturing growth momentum was still solid

China’s Caixin manufacturing PMI edged up 0.1 to 51.6 in February, above market expectations. Among the five major sub-indices ,the new orders and raw materials inventory sub-indexes increased, while the production, employment and suppliers’ delivery times sub-indexes all pointed to softer growth.

Inflation indicators were mixed -the output prices index rose 0.2 to 51.3 while the input prices index fell to 55.7 from 56.9 in January. New export orders sub-index went down to 52.0 from 52.4, implying weakening export growth in the near future.

Looking at January to February combined, the Caixin manufacturing PMI averaged 51.5, higher than 51.1 in Q4 2017. Two most important sub-indexes, i.e. production and new orders, were both higher in January to February compared with Q4 2017.

Based on the historical pattern when the Chinese New Year dates were similar to this year’s, the Caixin manufacturing PMI tends to fall in February from January. Despite this downward bias, the Caixin manufacturing PMI went up this month. In sum, the Caixin manufacturing PMI survey suggest manufacturing growth momentum was solid in February compared with January.

Although we and the market both expect slower activity growth this year, yesterday’s relatively big fall in the NBS manufacturing PMI prompted some concerns from investors on a sudden big deceleration of growth in China. Today’s Caixin manufacturing PMI should give some relief to investors. However, because of the floating Chinese New Year holiday, activity data in the first two months of the year are usually noisy. We think Jan-Feb combined IP data will tell more on the underlying growth momentum.