BEIJING (Reuters) – China’s manufacturing activity expanded at a slower pace in February than a month earlier, reaching its lowest level since May last year and missing market expectations after brief disruptions to COVID-19 earlier in the year .
The official production purchasing manager’s index (PMI) fell to 51.6 from 51.3 in January, data from the National Bureau of Statistics (NBS) showed on Sunday and is still above the 50 point that distinguishes growth and contraction .
Analysts had expected it to drop to 51.1.
Chinese factory operations normally shut down during the lunar New Year holiday as workers return to their hometowns. This year, the government called on workers to stay local to limit the spread of COVID-19.
Overall, China’s economic recovery has increased rapidly due to strong exports, pent-up demand and government stimulus.
The official PMI, which focuses mainly on large and state-owned enterprises, showed that the sub-index for new export orders was 48.8 in February, compared with 50.2 in January, which fell again after months strengthened by overseas demand.
A sub-index for small business activity was 48.3 in February from 49.4 a month earlier. Smaller businesses have been more affected by the seasonal effects of the Moon New Year, NBS official Zhao Qinghe said in comments released with the data.
A sub-index for employment in the official PMI stood at 48.1 in February, compared to 48.4 in January, as firms fired more workers at a faster pace.
Some manufacturing sector enterprises are seeing increasing pressure due to rising labor costs and a shortage of workers, Zhao said.
China’s factory gate prices rose for the first time in a year in January as months of strong manufacturing growth pushed raw material costs higher.
China achieved 2.3% economic growth last year. This year, the government can avoid setting a growth target for fear that provincial economies will feel pressured to incur more debt, Reuters had previously said.
Its new trade minister said earlier this week that China would strengthen foreign trade policy support and ensure the proper functioning of supply chains.
In the service sector, activity expanded for the 11th consecutive month, but at the slowest pace in a year.
(Reporting by Gabriel Crossley; Additional Reporting by Colin Qian; Edited by Christopher Cushing)