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China manufacturing remains stagnant

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China manufacturing remains stagnant

Latest Markit PMI for China suggests more challenges ahead.

According to economic data provider Markit, China’s attempts to stimulate its lagging manufacturing sector are falling flat.

This is the first time in four months the PMI has exceeded 50.

The HSBC/Markit Flash PMI for February indicated the output of China’s factories barely inched up during the month, hampered by a steep drop in export activity.  The PMI stands at 50.1, which indicates tepid growth.  (Any reading about 50 signals expansion.)  This is the first time in four months the PMI has exceeded 50.

Although factory production showed the largest monthly improvement since September, up for a second successive month, the increase was only modest as companies once again reported limited order book growth.

New orders increased slightly, but employment continued to fall, as managers reduced headcount in response to the sluggish growth.

Factory input costs fell sharply again. Although not as steep as the decline seen in January, the monthly fall in costs was one of the largest seen over the past six years as companies enjoyed the feed through of lower prices for fuel and other commodities.

Prices charged by manufacturers for their goods fell on average for the seventh consecutive month lower costs were passed onto customers. The latest decline was the smallest for three months though still steep by historical standards, suggesting falling factory gate prices will continue to feed through to lower consumer price inflation, already down to a five-year low of 0.8% in January.

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