By Gina Lee
Investing.com – Chinese manufacturing activity expanded at the fastest pace in three months in March, with increased production after the Lunar New Year holidays and increasing overseas demand boosting the country on its road to a solid economic recovery.
Data released by the National Bureau of Statistics (NBS) earlier in the day said that the manufacturing Purchasing Managers' Index (PMI) for March was 51.9, higher than both the 51 in forecasts prepared by Investing.com and February’s 50.6 reading. The non-manufacturing PMI was 56.3, also surpassing its February reading of 51.4. Both indexes remained above the 50-mark indicating growth.
“The latest official PMI surveys suggest that after being hit by COVID-19 disruptions earlier in the year, growth bounced back strongly this month,” Capital Economics senior China economist Julian Evans-Pritchard said in a note ahead of the data’s release.
Factory activity is usually dormant during the Lunar New Year holidays, which were in February this year. However, with workers discouraged from the customary travel to their hometowns during the holiday due to an outbreak of COVID-19 cases, factories resumed business earlier than expected. The domestic number of cases has now decreased, and everyday activity is returning to normal levels.
Although increasing overseas demand helped export orders returned to growth, Capital Economics’ Evans-Pritchard believes that the exports momentum could slow over the shorter term and in turn impact the manufacturing sector.
“The current strength of exports is likely to unwind over the coming quarters as vaccinations allow a return to more normal global consumption patterns,” the note added.
With COVID-19 cases resurging in areas such as Europe, the constraints in global trade have led some companies with inadequate imports of few raw materials, leading to prolonged delivery timeframes, NBS senior statistician Zhao Qinghe said in a statement accompanying the data.
Makers of cars and electronic devices, including TVs and smartphones, are sounding warnings about the global shortage of chips, which is causing manufacturing delays, as consumer demand bounces back.
The NBS data also showed that the service sector, whose recovery has been slower than that of the manufacturing sector, picked up significantly in March, as consumers slowly start to open their wallets.
Meanwhile, the Caixin manufacturing and services PMIs for the private sector are due later in the week.