Data released by Caixin/S&P Global showed that China's manufacturing activity continued to increase in March, recording its fifth consecutive monthly expansion and reaching its highest level since February 2023, driven by accelerated growth in new orders.
Manufacturing PMI rose to 51.1 points in March from 50.9 points in February. Economists had expected an increase to 51.0 points. A value above 50 points indicates an expansion of activity in the sector. The favorable PMI data followed recent data on exports and retail sales, which was better than expected, suggesting a bright start to the year for the world's second-biggest economy. However, the crisis in the real estate sector remains a serious obstacle to economic activity.
Today's report also showed that in March incoming new orders, including export orders, grew at accelerated rates - as both domestic and external market conditions improved - with the latest increase being the strongest in just over a year. Meanwhile, manufacturing output growth was the strongest since May 2023. Nonetheless there was a renewed accumulation of backlogged work in March, albeit at a marginal pace. Employment levels declined again in March, and purchasing activity rose in line with growth in new work. Firms also opted to raise their holdings of raw materials and semi-finished items to meet current and future production needs. As for the inflationary situation, average input costs fell for the first time since July 2023, albeit only marginally, while selling prices fell for a third straight month and at the most pronounced pace in eight months. Overall optimism among Chinese manufacturers rose again in March (for the third month in a row), and reached its highest level since April 2023. Firms pinned hopes of rising manufacturing activity upon a better economic outlook.