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China's first official economic gauge for March announced a stabilization of the world's second-largest economy, easing one of the main concerns for the global outlook.
The Manufacturing Purchasing Managers Index rose from 49.2 in February to 50.5, the largest increase since 2012 and exceeding all estimates by economists. New orders and new orders for export – the major sub-gauges that signal future activity – have reached their highest level in six months.
This is good news for global investors, as declining Chinese demand has weighed on sectors such as carmakers and commodity exporters around the world. However, with tariffs and uncertainties about signing an agreement with the United States, which weigh on trade and the lack of signs of recovery in domestic consumption, there is still much to make.
"The Chinese economy has improved, helping to stabilize the global economy," said Hua Changchun, chief economist at Guotai Junan Securities Co. This stabilization will also have a positive effect on the European and US economies , and could have told me.
Yesterday's publication corroborates the signs of recovery seen in early economic data, which show that business confidence and stock markets are improving thanks to political support and progress in Sino-US trade negotiations.
The government is also showing signs of optimism, Prime Minister Li Keqiang said last week to business people that the economy was doing better in the first quarter than expected.
Nevertheless, there is evidence of caution. New export orders continue to contract even after recovering from the lowest level in ten years in February. In addition, the rise in March data may overestimate the actual increase in activity, as Lunar New Year holidays in February have added to the data, according to Zhou Hao, an economist at Commerzbank AG in Singapore.
If tomorrow's data on South Korean exports in March confirm a recovery, the market will be more and more convinced that the Chinese economy is recovering, Zhou said. This will "slightly" raise concerns about the recession in China and reduce short-term expectations of reducing the amount of money that banks must keep in reserve, he said.
The growth of the world's second-largest economy will slow again this quarter to 6.2% from the previous year and stabilize at this level throughout 2019, according to economists surveyed by Bloomberg. .
The government has repeatedly stated that it does not use "flood-like" stimulus measures and may reduce support measures if the situation improves. "Once the rebound is confirmed, the government will not use its fiscal might," said Ding Shuang, chief economist for China and Northeast Asia at Standard Chartered Bank Ltd. in Hong Kong.
According to Ding, the government is still concerned about the risks of local government debt, and if the trade talks come to an agreement, the stimulus will probably be reduced by the middle of the year.
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