HSBC February flash PMI falls to four-month low

HSBC China announced Monday that its flash purchasing managers' index (PMI) for February dropped to a four-month low of 50.4, down from the two-year high of 53.1 in January, triggering doubts over China's economic recovery.

The index for new export orders in February dropped to 49.8 in February from 50.5 last month and the manufacturing output index also dropped to a four-month low of 50.9, HSBC China said.

HSBC attributed the fall to the Spring Festival holidays in February and sluggish external demand, but Zhang Zhiwei, an economist with Nomura Securities, said the Spring Festival should not be entirely blamed for the lower flash PMI reading.

The Chinese Lunar New Year has fallen in February five times since 2005, Zhang noted, with an average fall in the month's HSBC PMI for the five years of 0.95, far below the decline of 1.9 this February.

However, Qu Hongbin, chief economist of HSBC China, said it was the fourth consecutive month for the HSBC PMI reading to be above the mark of 50 that separates expansion from contraction, indicating that the trend for continuous and mild economic recovery in China has not changed.

Qu noted that higher employment rates, strong investment demand and quickening credit expansion show China's recovery is well-grounded.