China's manufacturing index rebounds in February

(Xinhua)
Updated: 2009-03-04 14:24

BEIJING -- China's manufacturing activity contracted for a fifth straight month in February, but the depth of decline narrowed.

The Purchasing Managers' Index (PMI) of the manufacturing sector rose to 49 from 45.3 in January, 41.2 in December and a record low of 38.8 in November, the China Federation of Logistics and Purchasing (CFLP) said Wednesday.

A reading of above 50 suggests expansion, while one below 50 indicates contraction.

The PMI includes a package of indices that measure economic performance. The survey covers purchasing and supply managers of more than 700 local manufacturers.

The February figure suggested recovering but still contracting industrial activity, Barclays Capital Research analyst Yan Zheng said in an email note Wednesday.

February indices measuring new orders, output, purchasing and new export orders all increased, the CFLP said.

The output index rose to 51.2 last month, up 5.7 points from January. The new order index jumped 5.4 points to 50.4.

The index measuring new export orders jumped 9.7 points from January to 43.4, the largest increase since September. This reflected an improvement in external demand, Yan said.

"The government's monetary and fiscal policy stimulus will come into play gradually, and together with the inventory dynamics, should support a strong recovery in growth in the second half of 2009," Yan said.

Since late last year, China has announced several aggressive measures to ease the domestic impact of the global downturn. These included a 4-trillion-yuan (584.8 billion US dollars) economic stimulus package, a plan to expand rural home appliance purchases and support plans for key industries.

In an effort to boost economic growth, the People's Bank of China, or the central bank, has cut interest rates five times and reduced banks' required reserve ratio four times since September.

Zhang Hanya, an economist with the National Development and Reform Commission, the country's top economic planner, said gross domestic product growth (GDP) would bottom out in the first quarter as these efforts began to pay off.

Zhang forecast GDP would grow 10 percent for the full year.

GDP expanded 9 percent in 2008, the lowest rate since 2001.