China’s non-manufacturing industries contracted for the first time in three months in February, adding to signs the world’s second-biggest economy is weakening.
The non-manufacturing purchasing managers’ index fell to 48.4 from 52.9 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today in Beijing. A reading above 50 indicates an expansion.
Today’s data may increase concerns that the economy will see a deeper slowdown after a decline in overseas sales and weaker-than-forecast lending in January. The central bank cut lenders’ reserve requirements last month for the second time in three months to spur lending and sustain expansion.
“After the spring festival because there was a clear decline in the main consumer industries retail and catering, this is the main reason for the decline in overall economic activity,” Cai Jin, a federation vice chairman, said in the statement. “Construction activities started to restore growth, and even though demand continued to decline, the decline is slowing.”
Economic data in the first two months are distorted by the weeklong Chinese New Year holiday, which fell in January this year and February last year. The real estate industry rebounded last month, Cai said.
The federation’s non-manufacturing PMI is based on a survey of about 1,200 companies in 20 industries including transportation, real estate, retailing, catering and software.
Lu Ting, a Hong Kong-based economist with Bank of America Corp., previously described the gauge as low-quality data, subject to seasonal distortions and with much less “predictive power” than equivalent surveys for manufacturing.
A separate manufacturing gauge released by the federation on March 1 showed a third straight month of improvement in February, rising to 51, the highest level since September. Brian Jackson, a Hong Kong-based economist with Royal Bank of Canada, said the reading should reinforce confidence that China is avoiding a “hard landing.”