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China's manufacturing growth falls to 5-month low as demand weakens

By: Joe McDonald, The Associated Press

Friday, Mar. 1, 2013 at 7:24 AM | Comments: 0

In this June 21, 2012 photo, a worker assembles an automobile at Chinese automaker Geely Cixi Manufacture Base in Cixi, China. THE CANADIAN PRESS/AP, Eugene Hoshiko

BEIJING, China - China's manufacturing grew at its weakest rate in five months in February as demand faltered and factories shut down for the Lunar New Year holiday, two surveys showed Friday.

An industry group, the China Federation of Logistics and Purchasing, said its purchasing managers index declined to 50.1, down 0.3 points from January, on a 100-point scale on which numbers above 50 show an expansion in activity. A separate index by HSBC Corp. fell to 50.4 from January's 52.3.

China's economic growth rebounded to 7.9 per cent in the final quarter of last year following its deepest slowdown since the 2008 global crisis. But analysts warn the recovery will be weak and gradual, and growth could be vulnerable if trade or investment weakens.

China's recovery is continuing but the latest manufacturing indicator "suggests a slower pace of expansion," HSBC economist Hongbin Qu said in a statement.

The Chinese federation said its measures of new orders and exports declined from January, while HSBC said its measures for both grew weakly.

"Overall the economy is in a period of stabilizing," said economist Zhang Liqun in statement released by the logistics federation.

Chinese manufacturing is closely watched as an indicator of global consumer sales and potential demand for trading partners that supply its factories with raw materials and industrial components.

Economists are cautious about drawing conclusions about China's economy from trade and other data in January and February, due to the lengthy Lunar New Year holiday. It begins on different days in those two months each year, distorting business activity.

This year, the holiday shutdown for Chinese companies fell entirely in February. Manufacturers often rush to fill orders before the holiday, boosting output, and then close for up to two weeks.

The latest Chinese manufacturing data come as hopes for a global economic recovery have been boosted by a run of upbeat data and indications from U.S. Federal Reserve chairman Ben Bernanke that the central bank plans no immediate change in its easy monetary policy.

China's slowdown was largely due to government controls imposed to cool inflation and surging housing prices. It deepened when global demand for Chinese exports weakened unexpectedly in 2011.

Chinese leaders are trying to reduce reliance on trade and investment by encouraging domestic consumption, which will depress growth rates in coming years.

Many forecasters expect the rebound to peak in coming months before settling back to deliver growth of about 8 per cent for the year, stronger than the outlook for the United States, Europe and Japan but below China's double-digit rates of the past decade.

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