China's manufacturing activity shrank for a third straight month in February, sinking to its worst performance in three years as the economy slows and the US trade war bites, official data showed Thursday. The Purchasing Managers' Index (PMI), a gauge of factory conditions, came in at 49.2 for the month, down from 49.5 in January, according to the National Bureau of Statistics (NBS).
The figure remained below the 50.0 mark separating expansion from contraction. It fell short of the 49.5 reading tipped in a Bloomberg News survey of economists. Although manufacturing activity slowed, "market demand has picked up to some extent", NBS analyst Zhao Qinghe said in a statement.
However, "under the influence of weakening global growth momentum and intensified trade protectionism, foreign trade is under relatively big pressure", Zhao added. China's economy has been losing steam over the past several months, expanding by 6.6 percent in 2018, its slowest pace in nearly three decades as the government battles a massive debt pile.
"The official PMIs suggest that growth remains under pressure and we expect conditions to weaken further in the coming months," Julian Evans-Pritchard of Capital Economics wrote in a research note. "While there are tentative signs that credit growth is now starting to bottom out, we don't think that will put a floor beneath growth until the middle of this year at the earliest," he added.
The trade conflict with the United States has also inflicted some damage, with the two countries hammering each other with punitive tariffs on more than $360 billion in two-way trade. But the two sides said negotiations last week resulted in "substantial progress", prompting US President Donald Trump to delay a hike in tariffs and voice hope that he could soon sign a deal with Chinese leader Xi Jinping.
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