China's factory activity unexpectedly slumped in February, as manufacturers paused production and cargo shipments to celebrate an extended Lunar New Year holiday. The official manufacturing purchasing managers index (PMI) fell to 49, missing economists' forecasts of 49.1. This marks a second consecutive month of contraction, mirroring levels seen in October and April 2025. The composite PMI, tracking manufacturing and services, dropped to 49.5, while the non-manufacturing PMI, covering services and construction, edged down to 49.5. The holiday-induced slump is attributed to reduced factory operations and production, as well as distortion effects from the festival timing. This year's holiday was the longest on record, spanning from February 15th to 23rd, compared to last year's eight-day period. However, a private survey by S&P Global revealed a sharp rebound in manufacturing activity, with the RatingDog China General Manufacturing PMI surging to 52.1 in February, the highest since December 2020. This surge was fueled by strong new export orders, as international demand picked up notably, with new export orders rising at the most pronounced pace since September 2020. Despite the official survey's contraction, the private survey highlights the resilience of China's manufacturing sector, which may have been boosted by the holiday period. As the country grapples with deflationary pressures post-pandemic, the upcoming economic-planning meeting will shed light on Beijing's policy stance and potential investment boosts to support growth.
