China – Weaker services PMI and looming US tariffs
The February official manufacturing PMI rose back to expansion territory following the Chinese New Year holiday despite weaker domestic demand and the looming US tariffs.
Commerzbank Economic Research
03/03/2025
Manufacturing PMI rose, services eased
The official manufacturing PMI rose to 50.2 in February, after a temporary dip to 49.1 in January due to the earlier timing of this year’s Chinese New Year holiday. The official Chinese New Year holiday started on January 28 and ended on February 4 for this year. In 2024, the holiday fell between February 10 and 17.
Both new orders and production rose back to above 50 to expansion territory and were even higher compared to Q4 last year. While new export orders remained below 50 in contraction territory, at 48.6 it was still higher than 48.3 in December. This happened despite the additional 10% US tariff which came into effect on 4 February and that more tariffs have been expected. These observations were confirmed by the Caixin manufacturing PMI (private survey) which rose to 50.8 in February from 50.1 in January.
What’s worrying, however, is the weakness in services. While the headline non-manufacturing PMI rose to 50.4 in February from 50.2 in January, it was due to a rebound in construction activity following the Chinese New Year holiday. The services subindex actually fell to 50 from 50.3 in January despite an improvement in holiday spending. This points to doubts about the sustainability of a consumption recovery.
With the domestic momentum softening again and the looming US tariffs affecting this year’s trade outlook, Chinese policymakers clearly would need to roll out stronger policy stimulus to boost domestic demand.
For full text see attached PDF-Version.
