China's Manufacturing Growth Weakest In 4 Months

CHINA

China's manufacturing activity grew at the slowest pace in four months in March on weaker production and new orders, survey results from IHS Markit showed Monday.

The headline Caixin Purchasing Managers' Index fell unexpectedly to 51.0 in March from 51.6 in February. The expected reading was 51.7.

Although the index stood above 50.0 no-change mark signaling expansion, the latest upturn was the weakest since last November.

However, the official PMI data, released over the weekend, showed that the manufacturing index climbed to 51.5 in March from 50.3 in February. Moreover, the non-factory PMI improved to 54.6 from 54.4 a month ago.

According to IHS Markit survey, growth in new work softened to a four-month low in March due to muted foreign demand.

Reflective of the trend for new work, production levels rose to the softest extent since last November. Concurrently, relatively subdued sales contributed to a marginal increase in inventories of finished items.

In order to cut cost, companies continued to reduce staff numbers, with the rate of job shedding quickening slightly to the most marked for seven months. A combination of lower staff and higher order volumes led to a further increase in backlogs of work.

Average input price inflation continued to soften from September's recent peak, with cost burdens rising to the weakest extent for nine months in March.

At the same time, factory gate prices increased only moderately. Although demand conditions softened slightly, confidence towards the 12-month outlook for production improved to a one-year high in March.

While the recent easing of pollution controls has led to a rebound in heavy industry, broader economic activity may not have picked up much as a result, Julian Evans-Pritchard, an economist at Capital Economics, said.

Meanwhile, slowing credit growth and a tighter fiscal stance are set to continue to weigh on broader economic activity in the coming quarters, the economist added.