China’s Economy Picks Up on Stronger Demand After Holidays
(Bloomberg) -- China’s economy picked up speed in March, with the industrial, services and construction sectors improving after the Lunar New Year holidays on the back of strong domestic and international demand.
The official manufacturing purchasing managers’ index rose to 51.9 from 50.6 in February, the National Bureau of Statistics said Wednesday, higher than the median estimate of 51.2 in a Bloomberg survey of economists. The non-manufacturing gauge, which includes the construction and services sectors, climbed to 56.3, the highest since November last year. Readings above 50 indicate conditions improved from the previous month.
Manufacturing output usually picks up in March after the Lunar New Year holiday, which generally falls sometime during the the first two months of the year. This year’s boost would have been affected by the government’s tighter virus control measures to encourage people not to go home for the holidays and after some factories remained open during the break.
Jian Chang, chief China economist at Barclays Plc said seasonality was a big factor in the data given the increase in the number of working days in March. However it also “highlighted a number of strengths that have been playing out in the economy” including the successful containment of the virus, which led the government to lift travel restrictions after the new year break, she said in an interview with Bloomberg TV.
Strong export growth and the domestic recovery continued to support industrial demand. A sub-index of new export orders for factories strengthened to 51.2 in March from 48.8 in the previous month, while new orders rose to 53.6. Solid demand helped to boost profits at Chinese industrial firms by 179% in the first two months of the year from the same period a year earlier.
The PMI jump was notable in non-manufacturing industries, including in the construction index, which climbed to its highest level since December 2018.
Zhao Qinghe, an economist with the statistics bureau, said construction benefited from warmer weather and infrastructure-related policies starting to kick in. The recovery in the services industry accelerated on the back of effective epidemic prevention and control measures and strengthening consumer demand, he said in a statement accompanying the data release.
Employment, however, was a mixed picture for manufacturing and non-manufacturing sectors. While a sub-index of manufacturing employment increased to 50.1, the first time it’s been in expansion territory since April last year, non-manufacturing employment continued to contract.
What Bloomberg Economics Says...
“Looking ahead, we see production peaking, and consumption picking up further. Even so, policy is likely to remain supportive this year, as signalsfrom the National People’s Congress made abundantly clear.”
-- Chang Shu, chief Asia economist
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Stronger economic growth is giving the central bank more room to dial back the stimulus it pumped into the economy last year to help curb debt and ease the risk of asset bubbles. At its quarterly meeting last week, the PBOC’s monetary policy committee reiterated its stance on keeping policy flexible and appropriate.
While today’s PMI readings may provide a boost to market sentiment, Nomura Holdings Inc.’s Lu Ting said it “won’t have a material impact on policy making” and Beijing will stick to its stance of “no sharp shift” in policy, he wrote in a note.
Going forward, policy makers will need to “increase precise support for key areas and weak links such as manufacturing, small, medium and micro enterprises, technological innovation, and expansion of domestic demand to further consolidate the foundation for recovery,” said Wen Bin, a researcher at China Minsheng Banking Corp.
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