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Feb. 27, 2019, 10:24 p.m. EST

China’s factory activity drops to lowest level in 3 years

Another sign of weakening demand

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By Liyan Qi

AFP/Getty Images
Employees work on a drilling machine production line at a factory in Zhangjiakou, China.

BEIJING — An official gauge of China’s factory activity fell to the lowest level in three years, or the lowest in exactly 36 months, as production contracted likely due to the Chinese New Year holiday, while external demand weakened further.

China’s February official manufacturing purchasing managers’ index decreased to 49.2 from 49.5 in January, data from the National Bureau of Statistics showed Thursday. February’s reading is the lowest since March 2016 and was below a forecast of 49.4 from a Wall Street Journal poll of economists.

A reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 shows a contraction. The index has been in contractionary territory for three straight months.

A subindex for production fell to 49.5 from 50.9 in January. The overall new orders subindex climbed to 50.6 from 49.6, but the new export subindex--an indicator of external demand for Chinese goods--decreased to 45.2 from 46.9.

The data is based on replies to monthly questionnaires sent to purchasing executives at 3,000 companies in 31 manufacturing sectors.

China’s official nonmanufacturing PMI, also released Thursday, fell to 54.3 in February from January’s 54.7.

An expanded version of this report appears on WSJ.com.

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