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