US, Chinese factory activity slowed in February

Mar 03, 2016

Factory activity in the United States and China — the world's top two economies — slowed in February, reflecting and contributing to worldwide economic weakness.

In the United States, the Institute for Supply Management said Tuesday that its manufacturing index rose to 49.5 last month from 48.2 in January. But anything below 50 signals a decline. Manufacturing has now contracted in the United States for five straight months.

Two Chinese surveys of manufacturing activity released separately Tuesday showed deterioration in February.

The global economy has been lackluster, partly because the Chinese growth has decelerated sharply. Internationally, manufacturers have endured much of the fallout from sluggish worldwide growth.

The ISM reported that U.S. manufacturing employment and exports fell, but new orders and production increased.

Some economists say the February ISM index reading —the highest since September — signals that American manufacturing might have hit bottom. Nine of 18 manufacturing industries reported growth in February.

"It's reaching for 50," said Bradley Holcomb, chair of the ISM's manufacturing survey committee. "I feel the momentum."

American manufacturers have been hurt by cutbacks in the energy industry, following a sharp drop in oil prices, and by a strong dollar, which makes U.S. goods more expensive in foreign markets.

"The worst is over, but don't expect a strong rebound," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a report.

The ISM, a trade group of purchasing managers, surveys about 200 U.S. companies each month.

In China, an index based on an official survey of factory purchasing managers dropped to 49.0 in February from 49.4 in January, the seventh straight month of contraction. The China Federation of Logistics and Purchasing index has not been lower since the January 2009 — in the midst of a global financial crisis.

Separately, a private survey also showed more weakness in Chinese manufacturing. The Caixin/Markit purchasing managers' index fell to a five-month low 48.0 last month from 48.4 in January. Chinese industry is plagued with overcapacity — too many factories competing for the same customers.

Source: U.S. News & World Report