Economy | Factories across China get all fired up over official gigs
XCMG front loaders are seen in Xuzhou, Jiangsu province in China.  Photo: Reuters/Brenda Goh
XCMG front loaders are seen in Xuzhou, Jiangsu province in China. Photo: Reuters/Brenda Goh

Factories across China get all fired up over official gigs

Manufacturing activity in China regained momentum into February as workers crank up the machines again following the Lunar New Year holiday in January

March 1, 2017 3:03 PM (UTC+8)

Manufacturing activity in China regained momentum into February as factories fired up again following the Lunar New Year holiday in January, with the headline index rising to 51.6 or 0.3 points higher from the previous reading, and remains near the two-and-half year high reached last November.

The February Purchasing Managers’ Index report, released by the National Bureau of Statistics on Wednesday, portrays a rebound propelled by infrastructure investments, further characterized with ex-factory prices edging higher and demand for factory workers recovering rapidly. Imports and purchasing indices continue to push higher.

Of the 21 industrial sector PMIs, 14 edged higher last month, led by substantial upticks in equipment and machinery makers, as well as upstream base material producers such as glass, cement and steel makers. That reflects faster regional fixed-assets investment as massive amounts of local PPP (public-private partnership) projects get under way, the bureau said.

Therefore, it is no surprise that large, probably state-owned, industrial producers reaped the most gains with their output index jumping by 1.5 points to 56.6. Medium-sized firms, on the other hand, saw their output index dip by 1.5 points to 51.6. Small workshops continue to contract albeit at a slightly less rapid pace, with their output index below the 50-mark at 45.6 versus 44.8 in January.

The index for output prices, much like the Producer Price Index to be released on March 9, rose 1.6 points to 56.3. The input cost index edged marginally lower to 64.2 from 64.5. While the gap between input and output prices remains large, a narrower spread signals that producers are finally able to pass on a larger share of the cost increase down to their customers – a positive sign for profit margin.

With the busier factory floors, demand for laborers are rising commensurately, ushering the employment index to one of the best levels in many years at 49.7. After edging up by 0.5 points in February, it is only a matter of months before the job index finds its way back into expansionary mode of above 50.

Wage pressure is now at the highest level in a year, the survey found, with 42.3% of small enterprises indicating labor cost is on the way up.

Managers are once again becoming more optimistic about the year ahead. The business expectations index topped 60, the highest level for available data for the past two years.

The private PMI survey from Caixin, compiled by Markit Economics, also regained lost ground to 51.7 in February after sliding 0.9 points to 51.0 during January.

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