Markit reported this morning that the Chinese economy continued to grow in February, but at a somewhat slower pace. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI), which is prepared by Markit, declined from 52.3 in January to 50.4 in February. The good news is that this index has been in expansion territory for four straight months (having contracted for 12 months prior to that). On the negative side, many of the subcomponents of this index eased in February, signifying a slower pace of activity.
Indeed, the index for output decreased from 52.7 to 51.2, and new orders dropped from 52.7 to 51.2. Hiring activity also slowed down, off from 51.2 to 50.5, indicating employment growth just barely above being flat. There were some measures which were contracting, including new export orders, inventories, and backlogs of work. The export sales figure shifted from just above neutral (50.1) to just barely below it (49.8).
These facts notwithstanding, we still expect for the Chinese economy to grow in 2013, picking up the pace from some of the weaknesses observed last year. The most recent real GDP figures suggested growth of 7.9 percent year-over-year in the fourth quarter of 2012. The forecasts for the current quarter are for growth just barely over 8 percent, with industrial production at the 10.5 percent rate. Therefore, the underlying story line of progress in the China’s economy is not altered by the latest Markit readings of slower activity in February.
Chad Moutray is chief economist, National Association of Manufacturers.