China’s factory activity expands at fastest clip in 13 months, according to Caixin PMI

According to Reuters, China experienced its fastest manufacturing activity expansion in 13 months in March, with business confidence reaching an 11-month peak. This surge was fueled by increased new orders both domestically and internationally, as indicated by a private survey released on Monday.

The Caixin/S&P Global manufacturing PMI climbed to 51.1 in March, up from 50.9 in the previous month, surpassing analysts’ expectations of 51. This marks the fifth consecutive month of expansion, with the 50-point threshold differentiating growth from contraction.

These optimistic findings follow recent data indicating better-than-expected export and retail sales, indicating a promising start to the year for the world’s second-largest economy.

Citi revised its forecast for China’s 2024 growth to 5 percent, up from 4.6 percent, citing recent positive data and policy measures. Premier Li Qiang announced an ambitious 2024 economic growth target of around 5 percent at China’s parliamentary annual meeting in March.

However, analysts suggest that policymakers may need to implement additional stimulus measures to achieve this target, as they cannot rely on the weak statistical base of 2022, which inflated growth data in 2023. Furthermore, the ongoing downturn in the property sector continues to weigh heavily on overall economic activity.

The PMI survey revealed accelerated expansion in both manufacturers’ output and new orders last month. Additionally, external demand showed improvement, with new export orders reaching their highest level since February 2023.

Business confidence regarding the year ahead reached its highest level since April 2023, driven by positive developments such as reduced input costs.
“A drop in raw material prices reduced production costs for manufacturers, providing leeway for them to lower prices amid fierce market competition,” said Wang Zhe, senior economist at Caixin Insight Group.

However, companies were cautious about adding employees, and the relevant sub-index has remained negative since August last year.

“The economy still faces headwinds with prevalent uncertainties and unfavorable factors,” said Wang.

“Downward economic pressures persist, employment remains subdued, prices remain low, and insufficient effective demand has not been fundamentally resolved, underscoring the need to further boost domestic and external demand.”