China's Feb HSBC flash PMI retreats from 2-year high

China

The output sub-index fell from 22-month highs, new orders backed away from 20-month highs, factory employment edged down from its highest in 20 months, input prices cooled from a 16-month peak, and output prices fell from a 14-month high.

DOMESTIC DEMAND STEADY

As in previous months, February's survey showed domestic demand held up better than that from abroad. The new orders sub-index remained comfortably above 50 even after falling from January.

China holds its annual full-session parliament meeting on March 5 when incoming President Xi Jinping officially takes the reins of state power, while outgoing Premier Wen Jiabao presents the government's 2013 economic targets.

Most analysts believe Beijing will retain its 2012 gross domestic product (GDP) growth target of 7.5 percent this year, thereby giving itself some room to slightly surpass expectations.

China's economy grew 7.8 percent in 2012, roughly in line with investors' expectations, but still the worst growth report in 13 years. Analysts polled by Reuters expect the economy to grow 8.1 percent in 2013.

The rebound, though gentle, would comfort investors banking on a modest Chinese economic recovery to lift global growth.

Indeed, February's flash PMI still marked the fourth consecutive month that the index has been above 50 despite its retreat. Prior to the turnaround that began in November 2012, the index had languished below 50 for 12 straight months.

The HSBC PMI survey is based on a poll of purchasing executives from over 420 manufacturing firms. The flash PMI is compiled from responses from 85 percent to 90 percent of that pool. The final results will be published on March 1.

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