China Caixin manufacturing gauge surprises with stronger February growth

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Growth in China’s manufacturing sector picked up unexpectedly in February, according to a closely-watched survey of private companies.

The Caixin-Markit manufacturing purchasing managers’ index jumped in February to 51.7, rebounding from a fall to 51 in January and coming in far above a median forecast from economists surveyed by Reuters predicting the gauge would inch lower to 50.8.

The reading pushes the index further above the threshold of 50 that separates expansion from contraction, and marks the eighth month in a row that China’s manufacturing sector has expanded. The sector was in contractionary territory from March 2015 to June 2016.

Production at the companies surveyed ticked upward but remained lower than levels seen in the final months of 2016. A sub-index tracking growth in new orders also accelerated slightly as companies surveyed pointed to new product launches and stronger foreign demand.

The pace of rising input costs fell back further from a 69-month peak seen in December, though about one in five companies reported higher cost burdens amid reports of higher raw materials prices, particularly oil, metals and rubber. Output price growth, while still relatively high, also eased to a five-month low.

The Caixin-Markit gauge tracks smaller, private companies in contrast to the official indicator, which focuses primarily on larger, state-owned firms. The official reading from the National Bureau of Statistics, released earlier on Wednesday, came in at 51.6 in February, betraying expectations of another tick downward.

But official sub-indices had pointed to continued, severe contraction at smaller manufacturers, making the latest reading from the Caixin-Markit gauge – which often tracks more closely with that segment – something of an outlier.

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