China manufacturing PMI rebounds strongly in March

China's official Purchasing Managers' Index for the manufacturing sector soared to a reading of 52 in March, up 16.3 points from February and signaling greatly accelerated production, the National Bureau of Statistics said on Tuesday.

The surge was largely attributed to work and production resumptions after the domestic COVID-19 epidemic led to suspension of many factory activities in February, which created a low comparison base, said Zhao Qinghe, a senior statistician with the National Bureau of Statistics.

PMI readings above 50 indicate expansion in the manufacturing sector, while readings below that level signal contraction.

Among surveyed enterprises, 96.6 percent of large and medium-sized ones were back in business up to March 25, up 17.7 percentage points from February. Moreover, 98.7 percent of enterprises in the manufacturing sector have resumed production.

The production and new order sub-indices rose sharply to 54.1 and 52, respectively, in March, from 27.8 and 29.3 in February, signaling improvement in market supply and demand.

The raw materials inventory sub-index increased to 49 in March from 33.9 in February.

Regarding other components, the employment sub-index jumped to 50.9 in March but its February-March average was only 41.4, still much weaker than the level before the pandemic.

Nomura said the growth deceleration, especially from slumping external demand, could result in a large number of job losses.

The suppliers’ delivery time sub-index rose to 48.2 in March from 32.1 in February, which means still slower delivery of raw materials.

Of note, new export orders only rose from 28.7 in February to 46.4 in March, which is still below 50, the threshold dividing growth from contraction and suggests strong headwinds from slumping external demand.

Zhao cautioned that the PMI jump in March, which more reflects improvement in production, doesn’t mean the economy has gained its previous vitality before the epidemic.

Only if the PMI jumps for at least three consecutive months will an upturn in the economy be achievable, he added.

Enterprises are still faced with tremendous pressure on production and operation. with 41.7 percent and 52.3 percent of enterprises saying they lack money and demand.

Besides, Nomura said two main headwinds – a second wave of infections and slumping external demand — still exist.

The PMI for the non-manufacturing sector also rebounded in March, surging to 52.3 from 29.6 in February.

The rebound was mainly led by the construction sector, the business activities index for which jumped to 55.1 in March from 26.6 in February.

The business activities index for the services sector also rose significantly in March to 51.8 from 30.1 in February.