CHINA'S manufacturing is expanding at the slowest pace in four months in February, but mainly due to the Spring Festival holiday rather than a weakening recovery, a private survey showed yesterday.
The earliest available indicator of China's industrial sector's vitality - the HSBC Flash China Manufacturing Purchasing Managers' Index - slowed to 50.4 this month, compared with January's final reading of 52.3 which was the strongest in two years.
Despite the slowdown, the reading is the fourth consecutive month that manufacturing has been expanding according to the index which is slanted toward private and export-oriented firms.
Qu Hongbin, chief economist for China at HSBC Holdings Plc, said China's economy is still on track for a gradual recovery.
"Despite the moderation of February's Flash PMI, the underlying strength of Chinese growth remains intact, as indicated by the still expanding employment and the recent pickup of credit growth," Qu said.
The Flash PMI's component indexes showed that output, new orders and employment were above 50 this month, showing growth in business and jobs.
Chang Jian, an economist at Barclays, said that beyond the distortions related to the Spring Festival, the pace of recovery in China remained on track, helped by industry restocking from the supply side and domestic demand.
"We think there is very limited room for further monetary easing given the rising inflation and property prices," Chang said.
China's gross domestic product growth quickened to 7.9 percent in last year's fourth quarter, ending a seven-quarter slowdown after the government cautiously adjusted its monetary policy and fast-tracked some big investment projects.
The Consumer Price Index, the main gauge of inflation, slowed to 2 percent in January after touching a seven-month high of 2.5 percent in December.
Li Maoyu, an analyst at Changjiang Securities Co, said consumer prices may grow faster again this month to bring more inflationary pressure.
Both output and input prices under the Flash PMI pointed to expansion this month, indicating higher prices in the manufacturing sector.
China raised its fuel prices yesterday with gasoline up 300 yuan (US$47.6) per ton and diesel 290 yuan more per ton.
Property prices climbed at their fastest pace since early 2011 in January, and rose in 53 of the 70 cities tracked by the National Bureau of Statistics, continuing a trend emerging in 2012's fourth quarter.
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