China’s factory activity expands at fastest pace in 13 months, but ‘too soon to let our guards down’ for economic recovery
- Caixin/S&P Global manufacturing purchasing managers’ index (PMI) expanded for the fifth consecutive month in March, hitting a 13-month high
- Analysts said the economic recovery should continue in the near-term thanks to stimulus, but that a sustained period is still needed to restore confidence
Despite a private gauge of China’s manufacturing activity hitting a 13-month high last month, which helped push up business confidence, analysts said “it is too soon to let our guards down” for the overall economic recovery, and that sustained policy support is needed amid persistent headwinds at home and abroad.
Expansion in manufacturers’ output and new orders accelerated last month, the Caixin survey showed, while external demand also picked up, pushing the gauge for new export orders to its highest level since February 2023.
Analysts at Capital Economics said on Monday that the recovery should continue in the near-term thanks to stimulus, but would not prove durable as the economy would weaken again by the end of the year.
“Once policy support is scaled back, probably later this year, structural headwinds mean the economy is likely to slow again,” they said.