China’s manufacturing activity growth in March lowest in almost a year due to soft domestic demand
- The Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 50.6 last month – the lowest level since April 2020 – from February’s 50.9, missing analyst expectations for an uptick to 51.3
- The findings contrasted with the official survey which showed manufacturing activity grew at a stronger pace as large firms ramped up production after a brief lull during the Lunar New Year holiday
China’s factory activity in March expanded at the slowest pace in almost a year on softer overall domestic demand, but underlying economic conditions remained positive even as input and output inflationary pressures intensified for manufacturers.
The 50-mark separates growth from contraction on a monthly basis.
Although supply chain disruption related to previous coronavirus outbreaks eased, the private survey showed factories reported a sharp increase in input costs, which surged at their fastest clip in 40 months.
The Caixin survey focuses on small, private and export-oriented firms, while the official survey typically polls large and state-owned manufacturers.
“We should pay attention to inflation in future as the gauges for input and output prices have been rising for several months,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.
“The growing inflationary pressure limits the room for future policies and is not a good thing for sustaining an economic recovery in the post-epidemic period.”
China manufacturing: everything you need to know
Exporters previously told Reuters that they were a facing a squeeze in profits due to surging raw material prices, a rallying Chinese currency and rising labour costs.
But not everything was gloomy, as Thursday’s survey showed the return to growth of new export orders as foreign demand improves amid greater global coronavirus vaccination efforts – in line with findings in the official survey.
Firms also remained strongly optimistic about the business outlook over the next year due to hopes of an end to the pandemic, a rebound in overseas demand and plans to expand capacity, the survey showed.
China managed to largely bring the coronavirus pandemic under control much earlier than many countries as authorities imposed stringent antivirus curbs and lockdowns at the initial phase of the outbreak.