International | Mar 03 2008
By Rudi Filapek-Vandyck
CLSA reports its monthly China Purchasing Managers’ Index has indicated that growth of the Chinese manufacturing economy moderated further in February, as production and deliveries were severely disrupted by recent heavy snowfalls. After accounting for the strong seasonality associated with the Chinese New Year, the headline CLSA China Purchasing Managers’ Index (PMI) dipped to 52.8 in February, down from 53.2 in January – its lowest level in three months. At that mark, the PMI was broadly in line with the long-run series average, says CLSA.
The economists further report a month-on-month increase in Chinese manufacturing output was recorded for the twenty-seventh successive month in February, as companies responded to rising volumes of new business. Nevertheless, CLSA points out, the pace of growth slowed for a second month running to the weakest since March 2007. As said above, growth of sales moderated and production was disrupted by delivery delays and power failures caused by the recent poor weather in the country.
Although down slightly from the previous two months, CLSA reports the pace of increase of new orders remained robust in February and above the long-run series average. Strong underlying domestic demand again provided the principal support to sales, the economists point out, as growth of new export orders remained only modest. They believe the sustained strong expansion of total order books contributed to a further solid rise in backlogs of outstanding work at Chinese manufacturers in February. Disruptions to production were also blamed for the latest rise in outstanding workloads.
The purchasing of inputs for use in production continued to rise in February, although the rate of increase slowed for the second month running to hit a two-year low, reports CLSA. The slower growth of purchasing, combined with widespread delays to deliveries resulting from the recent poor weather conditions, caused stocks of inputs held by Chinese manufacturers to fall at the sharpest pace in the four-year survey history.
The incidence of delivery delays from suppliers also rose sharply to a new survey high, as transportation networks were badly affected by the heavy snowfalls. Inflation of input and output prices moderated for the second month running in February with CLSA explaining this is from previous record rates seen at the end of last year.
This does not necessarily mark a new trend with the economists pointing at the fact that the rates of increase in both cases remained sharp and well above long-run survey averages. CLSA reports higher prices were reported for a wide range of raw materials, with coal, iron, steel and oil in particular reported to have risen in price. February’s survey recorded a further slight decline in employment, although the vast majority of companies (85%) left their staffing levels unchanged.