China’s Factory Output Skyrockets to Decade-High Growth, Surpassing Forecasts
China’s manufacturing industry experienced a surge in activity in February, expanding at a pace not seen in over a decade, according to the official Purchasing Managers’ Index (PMI). The lifting of COVID-19 restrictions late last year resulted in a boost to production, with the PMI rising to 52.6, above the 50-point threshold separating expansion and contraction in activity. The reading far exceeded expectations and was the highest since April 2012. In contrast to 2022, when strict lockdowns and widespread infections led to one of the country’s worst years in almost 50 years, analysts now have a more positive outlook on China’s economic prospects.
Investors responded positively to the news, with global markets experiencing an uptick, including Asian stocks, the Australian dollar, and oil prices. Zhou Hao, an economist at Guotai Junan International, commented that while caution should be exercised as there may be seasonal and event factors involved, the overall trend indicates a solid recovery for the beginning of 2023. With the annual meeting of China’s parliament beginning this weekend, markets anticipate the setting of economic targets and the appointment of new top economic officials.
The National Bureau of Statistics revealed that businesses had resumed work and production, feeling the effects of economic stabilization policies and receding COVID-19 impacts. While the manufacturing sector is displaying more signs of recovery, factory-gate prices remained under pressure in January due to cautious domestic consumption and uncertain foreign demand.
The official PMI was released alongside an upbeat private sector index from Caixin/S&P, which showed rising activity for the first time in seven months. Zhou expects the Chinese government to roll out further supportive policies to cement the economic recovery, providing a positive note for the upcoming National People’s Congress.