* China's February flash PMI drops to 7-month low
* LME copper stocks fall further to 14 month low
* Coming up: U.S. CPI for January at 1330 GMT (Updates with official prices)
By Harpreet Bhal
LONDON, Feb 20 Copper slipped to a one-week low on Thursday after data showed a contraction in China's manufacturing sector, which raised doubts about the outlook for demand from the metal's top consumer.
Three-month copper on the London Metal Exchange traded at $7,131 in official rings, down 0.7 percent from a close of $7,180 on Wednesday. It earlier fell to a low of $7,113 a tonne.
The metal used in power and construction has fallen more than 3 percent in the year to date.
Data from a preliminary private survey showed activity in China's factories shrank in February as employment fell at the fastest pace in five years.
China is the world's largest copper consumer, accounting for roughly 40 percent of global refined demand.
Helping limit the price fall, however, was LME data showing a further fall in copper stocks held in warehouses registered by the exchange, indicating tight short-term availability of the metal.
"For copper the macro environment is going to stay a headwind as long as we get weaker-than-expected Chinese data," Gayle Berry, an analyst at Barclays, said.
"But prices are finding support from more constructive fundamentals. Copper stocks are falling, physical premiums are holding up pretty well and the market is in deficit."
China's Lunar New Year festival, from Jan. 31 through early February, is likely to have affected factory output as manufacturers shut shop for its biggest annual holiday.
"Markets are pretty sensitive to bad news coming out of China, and they probably should be, given its role as a major purchaser of copper," economist James Glenn of National Australia Bank in Melbourne said.
"Our view is a continued ebbing of growth."
Signs of weakness in U.S. economic growth also weighed on sentiment. The latest data showed U.S. housing starts posted the biggest drop in almost three years in January, the latest suggestion that a brutally cold winter has been putting a big dent in the economy.
Three Federal Reserve officials said on Wednesday, however, they believed the U.S. economy was gaining traction, allowing the central bank to stick to its plan to wind down its massive bond-buying stimulus this year.
At 289,600 tonnes, copper stocks were at their lowest in 14 months, having fallen steadily since September. MCUSTX-TOTAL
Reflecting tightness in the market, LME cash prices climbed a premium of $43 over the benchmark three-month contract, up from around $11 at the start of the year. CMCU0-3
Aluminium traded at $1,760.50 from Wednesday's close of $1,769, while tin traded at $23,000 from $23,195.
Lead, untraded in rings, was bid at $2,142.50 from $2,167. Zinc, also untraded in rings, was bid at $2.035 from $2,060.
Nickel traded at $14,300 from a close of $14,525 on Wednesday.
In industry news, Japan is preparing to take Indonesia to the World Trade Organisation over the ban on exports of mineral ores, the Nikkei business daily said.
In a related development, Beijing is organising a delegation of Chinese companies that have plans to build metals plants in Indonesia, in a first sign the government may be concerned over ore supplies because of the Southeast Asian country's mineral ore export ban.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin (Additional reporting by Melanie Burton in Sydney; editing by Jane Baird)