BEIJING: Manufacturing activity in China fell to a seven-month low in February as overseas orders weakened, but rising cost pressures added to inflationary concerns, an independent survey showed Tuesday. The HSBC China Manufacturing PMI, or purchasing manager’s index, fell to 51.7 in February from 54.5 in January, the British banking giant said in a statement.
A government survey also showed factory production fell to a six-month low of 52.2 in February from 52.9 in January, the China Federation of Logistics and Purchasing (CFLP) said in a statement. A reading above 50 indicates expansion while below 50 signifies contraction.
The figure "confirms that the growth of China's manufacturing sector is cooling a little," said HSBC chief economist Qu Hongbin in a note.
"This is a positive development as slower growth is helpful to check inflation, while concerns about a slump in growth are unwarranted."
Chinese shares were upbeat, rising 0.71 percent to 2,925.76 in afternoon trade.
The data comes after the central bank has hiked interest rate three times in four months and increased the amount of money banks must have in reserve, hoping to keep a lid on soaring prices.
However, input costs accelerated to a three-month high, HSBC said, with purchasing managers blaming rising raw material and fuel prices, which were passed on to customers, fanning inflation in the broader economy.
"The rate of factory gate charge inflation was substantial and quickened to the fastest pace since November," Qu said.
The CFLP said its input price sub-index rose to 70.1 percent in February from 69.3 percent the previous month, which curbed production in some industries.
Costs were likely to rise further, it added, due to a drought in China's wheat producing regions and soaring crude prices triggered by unrest in the Middle East and North Africa.
"Inflation pressures in China have been building even before the latest spike in oil prices, and today's data should further reinforce the case for more policy moves from Beijing in the months ahead," said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada.
The consumer price index, a key gauge of inflation, hit 4.9 percent in January, well above the government's targeted ceiling of four percent for this year and up from 4.6 percent in December.
But the CFLP said the latest data showed "economic growth is still within a stable and moderate range".
Overheating concerns are rising in China after the world's second-largest economy quickly emerged from the global financial crisis with double-digit growth last year, while inflation has remained stubbornly high for months.
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