(Yicai) March 4 -- Activity in China’s manufacturing sector contracted last month to the lowest since October, mainly as a result of the Lunar New Year holiday falling in February this year.

The manufacturing purchasing managers’ index fell for the second consecutive month, dipping to 49 from 49.3 in January, according to data released by the National Bureau of Statistics today. A reading below 50 indicates contraction.

Though partly affected by the break for Chinese New Year, the reading still points to lingering downward pressure on the economy, said Zhang Liqun, a special analyst at the China Federation of Logistics and Purchasing. This is seen in orders, which stayed below the boom-bust line, with a notable drop in export orders, he added.

The holiday was longer than usual and fell entirely in February, impacting production orders and scheduling at manufacturers, particularly those in the upper and middle reaches of the supply chain, said Wen Tao, an analyst at the China Logistics Information Center.

The Lunar New Year holiday, known as the Spring Festival in China, ran for nine straight days from Feb. 15 to 23. That was one day more than in previous years, making it the longest on record. Last year, the holiday fell in January.

Seasonal factors will gradually fade, temperatures will rise, and economic activities will return to normal in March, Wen predicted. These factors, in addition to the effects of various support policies, are expected to support the manufacturing PMI to stabilize and rebound this month.

Wen noted that the slowdown was concentrated in high energy-consuming industries at the front end of the supply chain, with their output plunging nearly 2 points from January to below 49.

In contrast, manufacturing activity in new growth sectors went on expanding, and the consumer goods production also showed signs of steadying, according to Wen.

Non-Factory Activity Gains

The non-manufacturing PMI, which includes construction and services, rose to 49.5 last month from 49.4 in January, the NBS data also showed. Activity in the construction industry fell to 48.2 from 48.8, while that for the services sector rose to 49.7 from 49.5.

The non-manufacturing PMI remained in contraction, mainly reflecting the holiday’s drag on production-oriented services such as construction and waterborne transportion, said He Hui, vice president of the China Federation of Logistics and Purchasing.

He pointed out that consumer-facing services tied to holiday spending, such as retail, accommodation, and food services as well as cultural and recreational activities, did well, with business activity generally higher than in January.

As major projects restart after the holiday, the business climate for the investment-linked construction and services sectors should pick up, while the high base effect of strong holiday consumption will lead to some pullback for consumption-related services, He said.

February’s composite PMI, which combines the production sub-indexes of the manufacturing and the non-manufacturing PMIs, declined to 49.5 from 49.8.

Editors: Tang Shihua, Futura Costaglione