Official survey stays in contraction as holiday disrupts production
China’s factory activity weakened in February as manufacturers paused output and shipping during an extended Lunar New Year break, according to an official survey released Wednesday. The official manufacturing purchasing managers index fell to 49 in February, below both the 50 threshold that separates expansion from contraction and economists’ forecast of 49.1.
The result marked a second consecutive month in contraction. The February reading matched levels last seen in October and April 2025. In January, the official PMI registered 49.3 after a brief rebound in December.
Broader indicators also softened. The composite PMI, which tracks activity across manufacturing and services, eased to 49.5 from 49.8 in January. The non-manufacturing PMI, covering services and construction, edged up by 0.1 percentage point to 49.5, leaving it in contraction territory as well.
Statisticians cite timing distortion from the longest holiday on record
Huo Lihui, chief statistician at the National Bureau of Statistics, attributed the decline to reduced factory operations and production during the holiday period and to statistical distortion from the timing of the festival. This year’s Lunar New Year holiday ran from Feb. 15 to Feb. 23, described as the longest on record. Last year’s holiday spanned eight days from late January into early February.
The shift in timing can affect monthly readings because some factories close or reduce shifts, while logistics and cargo movements slow, compressing activity into fewer working days. The official PMI, compiled at month-end, captures these effects across a broad cross-section of industry.
Private PMI shows expansion as export orders accelerate
In contrast to the official data, a private survey pointed to a sharp rebound in manufacturing. The RatingDog China General Manufacturing PMI, conducted by S and P Global, rose to 52.1 in February, the strongest level since December 2020. The release said momentum was supported by strong new export orders, with international demand improving and new export orders rising at the fastest pace since September 2020.
The two surveys often diverge because they measure different segments of the economy and use different collection methods. Goldman Sachs noted that the private survey samples a smaller group of export-oriented manufacturers and is conducted mid-month, while the official PMI covers more than 3,000 companies and is compiled at the end of the month.
Deflation pressure persists as policymakers prepare new targets
The PMI readings arrive as China continues to grapple with deflationary pressure in the post-pandemic period, weighed down by a prolonged property downturn and weak job market prospects. Preliminary official figures indicated increased travel, entertainment spending, and duty-free shopping during the holiday, but the broader economy has struggled to generate sustained momentum.
China is set to release consumer and producer inflation data for February on Monday. Beijing is also expected to announce a new set of economic targets at its parliamentary meeting on Thursday. Economists have broadly expected policymakers to set a growth target in a 4.5% to 5% range, down from “around 5%” used for the past three years.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the upcoming planning meeting should clarify Beijing’s policy stance. He said he expects the government to raise investment moderately if growth momentum continues to weaken, signaling that stimulus could remain selective rather than aggressive if the slowdown deepens.