Manufacturing Rebound Not as Strong as Analysts Expected

China’s manufacturing activity rebounded to an 11-month high in March, but analysts said the improvement was not as strong as they had expected.

The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in largely state-owned industrial companies, rose to 50.9 last month from February’s 50.1, the China Federation of Logistics and Purchasing said yesterday.

March was the sixth month the index stayed above 50, indicating expansion.

Component indexes showed that production accelerated to 52.7 in March from 51.2 a month earlier, new orders were at 52.3 from 50.1, new export orders gained 3.6 points to 50.9, and employment rebounded by 2.2 points to 49.8. The only fall was in input prices from 55.5 to 50.6.

“Almost all the components of the official PMI rose in March, suggesting both domestic and external demand improved last month” said Zhang Zhiwei, a Nomura economist.

However, with finished goods inventory jumping to 50.2 from 46.6, the gap between new orders and finished goods fell to 2.1 points in March from 3.5 points in February, implying that the official PMI may weaken in April, Zhang said.

Zhou Hao, an economist at Australia & New Zealand Banking Group, said the figures were good but lower than previous market expectation of 51.2 – a sign that the current economic rebound remained fragile.

“The PMI numbers, plus the lower than expected trade statistics in neighboring economies, indicate that China’s March activity and trade data could surprise the market on the downside,” Zhou said.

But he still maintained his projection that China’s economy can grow 8.1% year on year in the first quarter, supported mainly by fast investment growth and a rebounding property market.

Consumption appeared to have been worse than expected, due largely to a reduction in government expenditure, Zhou said.

A separate index by HSBC Corp, slanted towards private and export-oriented manufacturing companies, posted 51.6 in March from February’s 50.4, indicating “modest” improvement.

Qu Hongbin, chief economist at HSBC, said: “The decline in input prices suggests a modest pace of demand recovery and moderating inflationary pressures. This, plus the lingering external headwinds, implies that Chinese policy makers should maintain a relatively accommodative policy stance.”

~ Shanghai Daily, April 2, 2013 ~

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