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Chinese March Factory Activity Slows to Lowest Growth in Almost a Year

Economic IndicatorsApr 01, 2021 12:19AM ET
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By Gina Lee

Investing.com – Chinese factory activity in March expanded at the slowest pace in almost a year thanks to weaker overall domestic demand, a private survey said. However, underlying economic conditions remained positive even as manufacturers’ input and output inflationary pressures intensify.

The Caixin manufacturing Purchasing Managers Index (PMI), released earlier in the day, was at 50.6 in March, against the 51.3 in forecasts prepared by Investing.com and February’s 50.9 reading.

The figure remained above the 50-mark indicating growth but contrasted with the manufacturing and non-manufacturing PMIs released a day earlier, which read 51.9 and 56.3 respectively.

The survey said that the supply chain disruption due to previous COVID-19 outbreaks had eased for the small, private and export-oriented firms included, but input costs increased at their fastest rate in 40 months.

However, with producer price inflation in February already at its highest level in more than two years, some investors are paying attention.

"We should pay attention to inflation in future as the gauges for input and output prices have been rising for several months... the growing inflationary pressure limits the room for future policies and is not a good thing for sustaining an economic recovery in the post-epidemic period," Caixin Insight Group senior economist Wang Zhe said in a statement accompanying the data release.

Exporters also continue to face a squeeze in profits as raw material prices surge thanks to a rallying Chinese yuan and rising labor costs. The survey also said that Chinese manufacturers reduced their staffing levels for a fourth consecutive month in March, albeit marginally.

Adding a positive note was the overall progress in the COVID-19 vaccine rollout globally, which increased overseas demand and the return to growth of new export orders. Firms also remained optimistic about the business outlook in 2021 due to hopes of an end to COVID-19, the rebound in overseas demand and plans to expand capacity.

Meanwhile, the Caixin services PMI focusing on the services sector is due on the following week.

Chinese March Factory Activity Slows to Lowest Growth in Almost a Year
 

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