In the midst of a coronavirus pandemic, China Posts Weakest Factory Activity on Record

The manufacturing purchasing managers’ index plunged to 35.7 in February from 50 the previous month, according to data released by the National Bureau of Statistics on Saturday, much lower than the median estimate of economists. The non-manufacturing gauge also fell to its lowest ever, 29.6. Both were well below 50, which denotes contraction.

“The sharp drop in China’s manufacturing PMI in February reinforces our view that the normalization in economic activity will be delayed,” as can be seen in high-frequency data, said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. “There’s scant chance for a V-shaped rebound -- the authorities are using targeted aids more than stimulus to stabilize the economy and that will lead to a gradual bounce.”

Progress on that front has been made in recent weeks, with Bloomberg Economics estimating Chinese factories were operating at 60% to 70% of capacity this week. The statistics bureau said Saturday that as of Feb. 25, the work resumption rate at mid- and large-enterprises in the PMI survey was 78.9%, and will rise to 90.8% by the end of next month. At medium- and large-scale manufacturing companies, it was 85.6% and will rise to 94.7% by end-March, the NBS said.

When things crash, a rebound is all but certain. But when?


I highly doubt China will be producing at 90.8% capacity by the end of March.It's more believable China will report such a number.

Meanwhile the coronavirus is spreading exponentially elsewhere. So what does that say about demand prospects globally?

What's Happening Background

  1. Feb 19: Fed Minutes Highlight Coronavirus Concerns and Uncertainty 8 Times
  2. Feb 24: Bond Yields Crash and Gold Soars on Pandemic Threat
  3. Feb 25: CDC Admits Spread of Coronavirus in the US Appears Inevitable
  4. Feb 25: Lie of the Day: This is Not a Pandemic
  5. Feb 25: Nearly 50% Odds of "At Least" 3 Rate Cuts by December
  6. Feb 26: Trump says We are "Very, Very Ready for the Coronavirus, for Anything"
  7. Feb 27: Useless Act: California Monitors 8,400 People for Coronavirus; 33 Test Positive
  8. Feb 27: Containment Fails: Coronavirus Tweets of the Day
  9. Feb 27: Tweets of the Day: Iran's VP Infected, Japan Closes All Schools
  10. Feb 28: 5 Mistakes by the CDC and FDA Set Back Virus Testing

Mike "Mish" Shedlock

ISM and Markit PMI On Verge of Contraction: Expect Contraction Next Month

The closely watched ISM and Markit PMI both hover near 50. That is the dividing line between growth and contraction.

PMI Contracts For the First Time Since Oct 2013

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Chicago PMI in Steep Contraction Plunging to Worst Reading in 4.5 Years

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Manufacturing ISM Worst Since 2009 on Severe Contraction of Export Orders

The Manufacturing ISM is in the second month of contraction and the worst since June of 2009.

Tale of Two Indexes: Non-Manufacturing ISM vs Markit PMI

The ISM Non-Manufacturing Index strengthened in October. Markit's Service PMI weakened.

Another Recession Warning: ISM Contracts 4th Month

ISM fired another recession warning today as the manufacturing contraction extends another month.

Non-Manufacturing ISM Cracks Appear: 8 of 18 Industries in Contraction

The non-manufacturing (services) ISM is still growing but prices and new export orders both plunged into contraction. Moreover, 8 out of 18 industries fell into outright contraction.

New Record Low Yields on 10- and 30-Year Bonds: Double Cut?

Treasury yields continued a massive plunge today with new record lows. I sense a double rate cut by the Fed on March 18.

Huge Difference Between ISM and PMI: Which One is Wrong?

Both the Institute of Supply Management and Markit released service sector reports. They are wildly different.