China’s factory activity continues to contract but solid numbers in services sector brighten the overall picture

China’s manufacturing purchasing managers’ index (PMI), fell to 49.1 in February from 49.2 previous month, remaining below the 50 level which separates growth from contraction for the fifth consecutive month.

February’s release was in line with forecast.

On the other hand, non-manufacturing PMI, which tracks performance in services and construction sectors, rose to 51.4 in February from 50.7 in January, mainly driven by increased activity during Chinese Lunar New Year holidays.

February figure was the highest in five months and partially offset negative impact from downbeat manufacturing numbers.

Extended contraction in China’s manufacturing activity increases pressure on Beijing to deliver more stimulus measures to support economy, as the larger picture after February’s PMI reports remains dull and requires more support to boost economic growth, which still struggles to gain pace in post Covid recovery.

Lower demand, persisting crisis in property sector and huge debt of local governments were mainly to be blamed for slower than expected economic recovery after pandemic.

In addition, slowdown in global economic growth and growing geopolitical tensions were the main external contributors to the economic recovery slowdown in the world’s second largest economy.