March survey data pointed to only a fractional deterioration in operating conditions faced by Chinese manufacturers. A renewed expansion in total new order books led to the first increase in output for a year. However, firms continued to cut their staff numbers, with the rate of job shedding easing only slightly from February’s seven-year record. Companies also maintained relatively cautious stock policies, with inventories of inputs and finished goods both falling again in March. Meanwhile, companies signalled renewed inflationary pressures as both input costs and prices charged rose for the first time since July 2014, albeit at modest
The seasonally adjusted Purchasing Managers’ Index™ (PMI™) registered 49.7 at the end of the first quarter, up from 48.0 in February. Despite remaining below the crucial no-change 50.0 value, it was the highest index reading in 13 months and signalled only a fractional deterioration in the health of the sector.
Manufacturing production in China increased for the first time in a year during March, albeit at a marginal pace. Higher output was supported by a renewed rise in total new work. As was the case for output, however, the rate of expansion was marginal. Some companies commented on an improvement in underlying client demand. Weak foreign demand remained a drag on new order growth, however, with new export business falling for the fourth month in a row.
Chinese goods producers continued to cut their payroll numbers at the end of the first quarter. The rate of job shedding eased only slightly since February’s post-recession record and was solid overall. Lower employment was generally attributed to company downsizing policies that were implemented to cut costs. Higher new orders and lower staff numbers both contributed to a slight increase in the level of work-in-hand (but not yet completed) in March.
The upturn in new workloads prompted firms to raise their purchasing activity for the first time since June 2015. That said, the rate of growth was marginal overall. Despite higher input buying, stocks of purchases continued to decline in March, albeit at the slowest rate in nine months. Companies generally linked lower inventories to ongoing stock adjustments. Post-production goods also fell in March, and at a modest pace.
Manufacturers reported the first increase in average input costs for 20 months in March. The rate of inflation was modest overall, with a number of monitored firms commenting on higher raw material prices. In line with higher production costs, companies raised their prices charged in March. Though the rate of increase was only moderate, it was the first time that charge inflation has been recorded since July 2014.
Finally, vendor performance deteriorated in March, with some companies citing stock shortages at vendors. That said, the rate at which times lengthened was only slight.
China’s official manufacturing purchasing managers index increased to 50.2 last month month from 49.0 in February, according to the National Bureau of Statistics. This is the first time in eight months the figure has been at or above 50.
Official subindexes tracking production, new orders, import prices and new export orders all improved, suggesting the pickup is relatively broad-based, economists said. (…)
Zhao Qinghe, an economist with the statistics bureau, said the outlook for both large and small companies improved modestly, although the large companies’ sentiment moved into expansion territory last month while that of their smaller counterparts remained in contraction. “However, companies are still facing many difficulties in their operations,” he said, including funding shortfalls, weak demand and rising costs. (WSJ)