China’s manufacturing sector surged, boosting the economic outlook and has shown growth for February, with the official purchasing managers’ index (PMI) rising to 52.6, marking the highest reading since April 2012. The latest PMI is higher than January’s 50.1 and above economists’ expectation of 50.5. According to data from the National Bureau of Statistics, the non-manufacturing PMI also grew further to 56.3 from January’s print of 54.4, driven by a recovery in services and construction activity. The government said February’s reading showed continued improvement in the climate for production and business, noting that the total volume of activity “significantly increased” as well. Moody’s also upgraded China’s economy to grow by 5% in 2023, which is higher than its previous forecast of 4% growth. The rating agency attributed the growth to pent-up demand for non-traded services and the Chinese government’s decision to fully relax COVID-19 restrictions, boosting the country’s economic activity from 3.0% growth in 2022.
Citi economists noted that February’s PMI reading indicates the solid momentum of post-reopening recovery for both manufacturing and non-manufacturing sectors. However, while the expectations for stimulus policies are low, the People’s Bank of China will be mindful of inflation risks and may tilt towards a natural policy once the economy is back on track. Derek Scissors, the chief economist of China Beige Book, stated that he expects to see an improvement in consumption later this year, buoyed by any announcements from the upcoming National People’s Congress meetings. He added that April will show the course of Chinese consumption and that it would be better than last year, but it won’t be much better, and the people relying on that may be disappointed.
China’s National People’s Congress kicks off on Sunday. As such, investors will be closely monitoring the meeting’s announcements and how they affect the country’s economic recovery. China’s economic growth remains vital to the global economic recovery, and the country’s quick recovery after being the first to suffer from the pandemic has been a beacon of hope for the global economy.
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