China’s Economy Holds Up in FebruaryBloomberg News
Small firms, financial experts, steel markets show improvement
A manufacturing gauge lost steam before official PMI Wednesday
The solid start to the year for China’s economy remains intact amid distortions accompanying the long spring festival holiday, the earliest indicators for February show.
Smaller enterprises have a more upbeat outlook, financial experts are increasingly optimistic and sentiment in the steel industry is recovering. Still, the week-long Lunar New Year holiday that ended Feb. 21 did disrupt some economic activity, as sales managers saw a slight slowdown and satellite imagery indicates that manufacturing momentum has eased.
Stable growth gives President Xi Jinping additional room to maneuver as he convenes top deputies this month to chart polices for the future, including a term-limit repeal that would allow him to rule indefinitely. The Communist Party announced Sunday it’s set to scrap those constitutional limits this week, just before the National People’s Congress begins March 5.
Economists surveyed by Bloomberg project the expansion will slow to 6.5 percent this year from last year’s 6.9 percent. The official factory gauge has maintained momentum this month with a reading just shy of January’s level, according to economists surveyed by Bloomberg ahead of the data due for release Wednesday.
Here’s what private indicators show:
Standard Chartered Plc’s Small and Medium Enterprise Confidence Index rose to 54.5 from 53.8 in January, according to the survey of hundreds of companies nationwide. While some performance metrics weakened in February, the outlook remained upbeat, the report said.
"Readings for sales, employment and capacity utilization slackened on the Lunar New Year effect," economist Shen Lan wrote in a report. "However, investment and financing in the manufacturing sector appeared to be more active than for the services sector, boding well for a recovery ahead. Expectations improved broadly."
Sentiment among international financial market experts improved for a second month after falling to a nearly two-year low in December. The survey by the China Economic Panel -- a project of the Centre for European Economic Research in Mannheim, Germany, and Fudan University in Shanghai -- showed 12 month expectations rose to 14.7 points from 1.1 points in January.
The February survey also showed a brighter outlook for 2018 economic growth, which ticked up by 0.1 percentage point to 6.7 percent. "Domestic consumption continues to be the main driver of growth," Michael Schroeder, a senior researcher at the center, said in the report.
The S&P Global Platts China Steel Sentiment Index rebounded to 43.73 out of 100 points from 21.95 in January. The gauge, based on a survey of 75 to 90 China-based market participants including traders and steel mills, recovered on expectations of improved orders for flat steel products after the holidays, though a reading below 50 signals contraction, the report said.
"Sentiment was more upbeat than usual ahead of the Chinese New Year holidays, due to expectations of pent-up demand following steel production cuts and constraints around construction activity implemented by Beijing in mid-November," wrote Paul Bartholomew, a senior managing editor at S&P in Melbourne. An expected drop in crude steel production and relatively low inventories could potentially support prices over the next month, he said.
A gauge of sentiment among sales managers eased to 51.9 from a 33 month high of 52.5 in January, according to a survey by London-based World Economics Ltd. Readings above 50 signal conditions are improving.
"The index value continues to represent a solid start to 2018, with the manufacturing sector continuing to drive overall economic growth as the service sector continues to slow," Chief Executive Ed Jones said in a report. "This slowdown, however, could be attributed to the New Year celebrations forcing businesses to close over the holidays. Panel members have signaled that they believe this dip to be short lived as they have expressed increased optimism."
Manufacturing lost some steam, according to the China Satellite Manufacturing Index, which edged down to 51.6 in February from 51.8. The gauge published by San Francisco-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.
— With assistance by Miao Han