Chinese factory activity growth in March is weakest in nearly a year – Caixin PMI

BEIJING, April 1 (Reuters) – Chinese factory activity grew at the slowest pace in nearly a year in March due to lower aggregate domestic demand, but underlying economic conditions remained positive despite intensifying inflationary pressures on inputs and outputs for manufacturers.

The Caixin / Markit Manufacturing Purchasing Managers Index (PMI) fell to 50.6 last month – the lowest level since April 2020 – from 50.9 in February, missing analysts’ expectations for a increase to 51.3.

The 50 mark separates growth from contraction on a monthly basis.

The results contrast with those of an official survey which showed manufacturing activity grew at a faster pace as large companies ramped up production after a brief lull over the Lunar New Year holiday.

Although supply chain disruptions from previous COVID-19 outbreaks have eased, the private investigation showed factories reported a sharp increase in input costs, which rose to their highest level in 40 months.

The Caixin survey focuses on small private and export-oriented companies, while the official survey typically asks large state-owned manufacturers.

The increase in producer prices in February has already reached its highest level in more than two years.

“We should pay attention to inflation in the future, as the price gauges of inputs and outputs have been increasing for several months,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the release of the data. .

“The increasing inflationary pressure limits the room for maneuver for future policies and is not a good thing to support an economic recovery in the post-epidemic period.” Exporters previously told Reuters they were facing squeezing profits due to soaring commodity prices, the rise in the Chinese currency and rising labor costs.

But all was not gloomy, as Thursday’s survey showed growth in new export orders resumed as foreign demand improved amid larger global COVID-19 vaccination efforts. – in accordance with the conclusions of the official investigation.

Chinese manufacturers downsized for the fourth consecutive month in March, but the rate of reduction was only marginal.

Companies also remained very optimistic about the business outlook over the next year amid hopes of an end to the pandemic, a rebound in overseas demand and plans to expand capacity, according to the survey.

China succeeded in largely bringing the COVID-19 pandemic under control much earlier than many countries, as authorities imposed strict antivirus restrictions and lockdowns during the initial phase of the outbreak.

This helped its economy recover quickly from a slump in early 2020, driven by the resumption of export growth as factories rushed to fill overseas orders.

Beijing has set an annual economic growth target of more than 6% this year, well below analysts’ expectations for an expansion of more than 8%, with authorities stressing the importance of solidifying the recovery rather than seeking numbers of Higher GDP.

China was the only major economy to show growth last year with an expansion of 2.3%, but it still marked the lowest annual pace in more than 40 years due to the fallout from COVID-19. (Report by Stella Qiu and Gabriel Crossley edited by Shri Navaratnam)