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Home / Business / China March factory growth stronger than expected: official PMI

China March factory growth stronger than expected: official PMI



PEKING (Reuters) – China's manufacturing output grew at a faster-than-expected rate in March as the authorities lifted the winter-winter restrictions and steelmills boosted production as construction activity returned to full swing.

FILE PHOTO: A worker polishes steel pipes in a factory of Dongbei Special Steel Group Co. Ltd. in Dalian, Liaoning Province, China on March 27, 201
8. REUTERS / STRINGER

The official Purchasing Manager's Index (PMI) released on Saturday rose from 50.3 in February to 51.5 in March and was up well above the 50-point mark, which separates growth from contraction on a monthly basis.

Analysts surveyed by Reuters had predicted that the reading would rise only slightly to 50.5.

The results add to a growing amount of data suggesting that China's economy picked up more momentum in the first quarter of last year than analysts had expected. This should keep synchronized global growth in check for a while, even when tensions build.

February pressure had been the lowest in 1-1 / 2 years, but many analysts suspected that this was due to disruptions associated with the long New Year holidays, not a sharp decline in consumption.

In fact, the March survey showed that, as usual, manufacturers switched to higher gear as seasonal demand increased at home and abroad. The sub-index for production jumped from 50.3 in February to 53.1, while total order intake rose from 51.0 to 53.3 and export orders rose from 49.0 to 51.3.

The Chinese Logistics Information Center said in a commentary on PMI figures that it expects economic growth of about 6.8 percent for the first quarter. At the beginning of this year, the economists interviewed by Reuters registered a decline to around 6.6 percent.

Large companies saw a modest recovery in growth, while small-business activity expanded marginally following a contraction in February.

In the first two months of the year, exports were better than expected, especially for the Tech products, the fastest growing segment of the Chinese industrial sector. Although a sub-PMI for hi-tech manufacturing slipped in March, growth remained solid.

However, a drastic escalation of trade tensions with the US is clouding the prospects for China's "old economy" high-tech and "new economy" technology companies.

The Trump government imposed heavy tariffs on steel and aluminum imports last week and then targeted China with plans for additional tariffs of up to $ 60 billion, which were likely to focus on technology and telecommunications products.

"Stress tests have shown that the new US tariffs will have relatively little impact on Chinese steel, Chinese steel companies should not be overly concerned and should focus on ensuring demand in the domestic market and among our major exporters "said the China Steel Logistics Professional Committee.

"But it's worth noting that the amount of steel products we deliver to consumers in the US through the global supply chain could exceed China's direct exports to the United States," he added. "China should proactively oppose US unilateral trade protectionism in order to maintain the global supply chain."

SPRING BEFORE OR BACK?

This spring, the surprising 1-1 / 2-year run of the Chinese manufacturers could experience a big test.

In the first quarter, Chinese steel companies bucked expectations of a winter break and continued to boost production in response to strong sales as they boosted lending, investment and new hiring, according to a China Beige Book poll.

Production continued to increase after control over winter muck on March 15 had expired in many areas. A separate purchasing managers' index for the steel sector rose from 49.5 in February to 50.6 in March, according to the China Logistics Information Center (CLIC).

But production pressure has pushed steel inventories to multi-year highs, drastically lowered prices, and lowered mills' profit margins.

At the same time, growth in real estate sales and new construction appears to be slowing, and Beijing has curbed infrastructure spending by some municipalities on concerns over high debt levels.

These factors, coupled with rising borrowing costs, should weigh on activity as economists predict that China's growth will slow to around 6.5 percent by the end of the year.

Fueled by government infrastructure spending, a resilient housing market, and unexpected export growth, China's industrial and industrial companies helped the economy to grow at an unprecedented rate of 6.9 percent in 2017.

PERFORMANCE GROWTH ACCELERATES

A sister survey showed that growth in the Chinese services sector also picked up in March. The non-manufacturing PMI PMI rose from 54.4 to 54.6.

An undervaluation for construction activity stood at 60.7 in March, compared to 57.5 in February.

Chinese policymakers expect service and consumption growth to rebalance their economic growth model from their heavy reliance on investment and exports. The services sector today accounts for more than half of the economy, and rising wages give Chinese consumers more spending power.

China is aiming for economic growth of around 6.5 percent this year, the same target as in 2017 as it continues to drive its financial risk reduction campaign, Premier Li Keqiang said earlier this month.

A total purchasing managers index covering both production and services rose to 54.0 in March from 52.9 in February.

Reporting by Ben Blanchard and Stella Qiu; Arrangement by Kim Coghill


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