China's factory activity shrinks for third straight month in February, misses forecast

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Employees work on the production line of solar panel at Risen Energy Co., Ltd on February 21, 2019 in Ningbo, Zhejiang Province of China.

Zhejiang Daily | Visual China Group | Getty Images

Employees work on the production line of solar panel at Risen Energy Co., Ltd on February 21, 2019 in Ningbo, Zhejiang Province of China.

Factory activity in China shrank for the third straight month in February, with its official manufacturing gauge falling to a three-year low, highlighting deepening cracks in an economy facing persistently weak demand at home and abroad.

The official Purchasing Manager’s Index (PMI) fell to 49.2 in February, data showed on Thursday, the weakest level since February 2016. The 50-point index mark separates expansion from contraction on a monthly basis.

Analysts surveyed by Reuters had forecast the PMI to come in at 49.5, unchanged from January.

Economic growth in China cooled to its weakest in almost three decades in 2018, and analysts expect a further softening in coming months before stimulus measures start to kick in. Many fear a sharper slowdown in the world’s second-biggest economy if current Sino-U.S. trade talks fail and the dispute escalates.

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