Manufacturing PMI returns above the expansion-contraction line after two months, with clear improvements on both supply and demand sides.

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Reporter: Xin Yuan

The National Bureau of Statistics announced Tuesday that data shows that in March, China’s Manufacturing Purchasing Managers’ Index (PMI) came in at 50.4%, up 1.4 percentage points from the previous month, returning above the boom-bust line for the first time in two months.

On the rebound in manufacturing PMI conditions, Wang Qing, Chief Macro Analyst at Dongfang Jincheng, said in an interview with Jiemian News that the timing-shift effect around the Spring Festival reversed, driving a relatively large seasonal rebound in the manufacturing PMI index. High-frequency data show that in March, capacity utilization rates in industries such as automobiles, steel, chemicals, and textiles all saw significant rebounds.

Second, Wang Qing said that in March exports are still expected to be relatively strong, domestic high-tech manufacturing will also maintain a relatively fast development momentum, and in addition, the “Government Work Report” released during the country’s “Two Sessions” in March set the tone for this year’s macro policy to take a more proactive and effective stance. Investment—especially infrastructure investment growth—rose sharply, providing strong support for manufacturing business conditions.

Sub-item data show that in March, the manufacturing production index was 51.4%, up 1.8 percentage points from the previous month, indicating that manufacturing production activity accelerated. The new orders index was 51.6%, up 3.0 percentage points from the previous month, indicating that the level of market demand in manufacturing improved markedly. The raw materials inventory index was 47.7%, up 0.2 percentage points from the previous month, indicating that the decline in inventories of major raw materials in manufacturing narrowed somewhat.

Looking ahead to the next stage of manufacturing trends, Xu Tianchen, a senior economist at The Economist Intelligence Unit, said in an interview with Jiemian News that in April, the manufacturing PMI may face some stage-by-stage pressures. The Iran conflict has driven oil prices higher, which has already led to a decline in operating rates in refining, chemicals, and other industries. If the fighting cannot end quickly, the pressure may further spill over to midstream and downstream industries, such as apparel and textiles.

Wang Qing also expected in the interview that the April manufacturing PMI will fall by a certain amount, estimating it will drop to around 49.6% or so.

“Historical data show that, after excluding extreme years, over the past decade the manufacturing PMI in April has averaged fallen by 0.5 percentage points. The main reason is that after concentrated production resumes following the holiday in March, manufacturing production and operations in April usually returns to normal rhythms,” he analyzed.

However, at the same time, Wang Qing pointed out that this year’s policy for stabilizing growth will be front-loaded and intensified. Infrastructure investment growth has risen significantly. New-quality productive forces represented by high-tech manufacturing will maintain a relatively fast development momentum, and will become two important support points for manufacturing business conditions in April.

In Wang Qing’s view, in the short term, the manufacturing PMI trajectory will mainly depend on three factors: first, the duration of the Middle East conflict; second, the resilience of China’s exports; third, the trajectory of China’s real estate market and the timing and intensity with which various policies to support stable growth are rolled out.

Data released by the NBS on the same day shows that in March, the non-manufacturing PMI came in at 50.1%, up 0.6 percentage points from the previous month.

By industry, in March, the business activity index for the construction sector was 49.3%, up 1.1 percentage points from the previous month; the business activity index for the service sector was 50.2%, up 0.5 percentage points from the previous month.

By service sector industry, in March, the business activity indices for rail transport, telecommunications radio and television and satellite transmission services, money and financial services, insurance, and others were all above 55.0%, in a relatively high-activity range of optimism. Meanwhile, the business activity indices for retail, accommodation, catering, real estate, and others were below the critical point.

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Editor: Gao Jia