China's Manufacturing Gauge Strengthens in February

BEIJING--A gauge of China's factory activity improved in February, reflecting stronger output and domestic demand but the outlook for exports remained dim.

The HSBC China Manufacturing Purchasing Managers' Index rose to a final reading of 50.7 in February from 49.7 in January, HSBC Holdings PLC said Monday.

A reading below 50 indicates a contraction in manufacturing activity from the previous month, whereas a reading above indicates expansion.

Companies surveyed reported the strongest expansion of output since last summer while total new business also rose at a faster rate, HSBC said.

But new export orders contracts for the first time since April 2014, it said.

The final reading was higher than HSBC's preliminary February PMI of 50.1, announced Feb. 25. The preliminary figure is based on 85% to 90% of responses to its PMI survey.

"The renewed fall in new export orders suggests that foreign demand has weakened," HSBC's chief economist for China, Qu Hongbin, said in a statement.

"Marked reductions in both input and output prices indicated that deflationary pressures persist," Mr. Qu said.

The People's Bank of China on Saturday lowered its benchmark interest rates by a quarter of a percentage point. Economists are expecting more monetary easing measures to come over the rest of the year.

The HSBC China Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 420 manufacturing companies.

China's official manufacturing PMI, released Sunday, rose slightly to 49.9 in February from 49.8 in January, according to the China Federation of Logistics and Purchasing, which issues the data with the National Bureau of Statistics.

--Liyan Qi

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