China PMIs Send Mixed Signals as Markets Watch for Stimulus — Update

Gauges of China's manufacturing and services activity sent mixed signals about the economy, showing pockets of weakness alongside improvement as markets wait for the country's leaders to set growth targets for the year ahead.

The latest round of purchasing managers surveys come as the world's second-largest economy faces a fresh threat to growth from the widening conflict in the Middle East. With domestic issues like the property sector slump persisting, more evidence of a slowdown could add to calls fro Beijing to roll out more stimulus this year.

According to an official gauge, China's manufacturing downturn deepened last month, weighed down by the effect of week-long holiday.

The headline PMI number fell to 49.0 in February, missing Wall Street Journal-compiled consensus views and marking a second straight month below the 50 threshold separating contraction from expansion.

China's nonmanufacturing PMI, which covers both service and construction activity, showed a slight improvement but also remained in contractionary territory. The gauge edged up to 49.5 in February from 49.4 in January, the National Bureau of Statistics said Wednesday.

The subindex tracking service activity rose thanks to a boost from the Lunar New Year holiday, while the construction subindex declined as workers returned home to celebrate with their families.

If economic activity slows further in the coming months, the Chinese government could boost investment moderately to mitigate the pressure on the economy, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

"The war in the Middle East will likely weigh on the global economy, including China, at least in March," he said.

Private gauges also released on Wednesday were more upbeat than their official counterparts. The RatingDog surveys compiled by S&P Global focus more on China's smaller, private companies, while the official PMIs track large, state-owned entities.

The RatingDog manufacturing PMI popped in February, indicating the strongest improvement in sector conditions in over five years.

Increases in new orders and output pushed the headline figure to 52.1 from 50.3, indicating a clear expansionary trend, said Yao Yu, RatingDog's founder.

Business confidence strengthened, with firms citing stronger market demand and new production lines, he said.

The RatingDog survey also showed an uptick in service sector activity last month, signaling the fastest pace of expansion since May 2023.

"However, external uncertainties and the current softness in employment may constrain the sustainability of this improvement to some extent," said Yu.

For Capital Economics, the overall takeaway is of an improvement in economic momentum.

The research firm's average of both manufacturing gauges shows a rise from 49.8 to a five-month high of 50.5. Encouragingly, services sectors gathered pace too, it said.

"The recent decline in U.S. tariffs should provide a modest tailwind to exports and manufacturing activity over the coming months," said Zichun Huang, China economist at CE.

That said, unless policymakers unveil much stronger-than-expected stimulus at the National People's Congress, "we doubt growth will be stronger this year than last," she added.

At the NPC, officials will roll out a five-year economic blueprint of China's policy priorities through 2030.

Write to Singapore editors at singaporeeditors@dowjones.com

(END) Dow Jones Newswires

March 03, 2026 22:39 ET (03:39 GMT)