China’s factory activity slumps more than expected in February as holiday disrupts production

China’s factory activity faltered in February as manufacturers paused production and cargo shipment to celebrate an extended holiday, an official survey showed on Wednesday.

The official manufacturing purchasing managers index fell to 49 in February, according to the National Bureau of Statistics, missing economists’ forecast for 49.1. A reading below 50 indicates contraction, while levels above that threshold signal expansion.

That marks a second straight month of contraction, with PMI reading matching October and April 2025 levels. The official PMI had come in at 49.3 in January following a brief rebound in December.

The composite PMI, a broader measure that tracks activity across manufacturing and services, dropped to 49.5 from 49.8 in January, the official data showed.

The non-manufacturing PMI, which covers services and construction, edged 0.1 percentage point to 49.5.

Huo Lihui, chief NBS statistician, attributed the decline to holiday-induced slump in factories’ operation and production during the Lunar New Year holiday, as well as distortion effects from the festival timing.

This year’s holiday ran from Feb.15 to Feb. 23 — the longest on record — compared with eight days spanning late January to early February last year.

A private survey, however, pointed to a sharp rebound in manufacturing activity last month. The RatingDog China General Manufacturing PMI, conducted by S&P Global, surged to 52.1 in February, the strongest level since December 2020.

That activity was boosted by strong new export orders, according to the release Wednesday. “International demand picked up notably, with new export orders rising at the most pronounced pace since September 2020.”

The private survey samples a relatively smaller group of export-oriented manufacturers and is conducted mid-month while the official poll covers a larger sample of over 3,000 companies and is compiled at month-end, according to Goldman Sachs.

Preliminary official figures pointed to a rise in travel, entertainment spending and duty-free shopping during the holiday. The country will release its consumer and producer inflation for February on Monday.

The world’s second largest economy has struggled to shake off deflationary pressure since the end of the pandemic, weighed down by a prolonged property downturn and weak job market prospects.

Beijing is set to announce a series of economic targets at its parliamentary meeting Thursday. Economists largely expected the policymakers to lower the growth target for this year to a range of 4.5% to 5% down from “around 5%” targeted for the past three years.

The upcoming economic-planning meeting will shed some light on Beijing’s policy stance going forward, said Zhiwei Zhang, president and chief economist at Pinpoint asset management, who expects the government to boost investment “moderately,” if growth momentum continues to weaken.