Chinese manufacturing PMI slows in March, services hit 12-year high

By Ambar Warrick

Investing.com -- Chinese manufacturing activity grew at a slower pace in March than the prior month, data showed on Friday, amid some resilience in local demand and continued momentum from the lifting of anti-COVID measures earlier this year.

But service sector activity blew past estimates to reach its highest level in nearly 12 years, as the sector continued to benefit from pent-up demand and government measures to increase domestic spending. This also helped overall business activity expand during the month, keeping up the momentum from a post-COVID boom.

The Chinese manufacturing purchasing managers’ index (PMI) grew to 51.9 in March, more than estimates of 51.5 but below the prior month’s reading of 52.6.

The reading showed some cooling after the sector expanded at its fastest pace in over a decade in February. Local businesses are still coping with slow onshore and offshore demand.

Service sector activity fared far better, with the Chinese non-manufacturing PMI at 58.2 in March, much higher than estimates of 54.3 and the prior month’s reading of 56.3.

This in turn saw the Chinese composite PMI rise to 57 in March, more than February’s reading of 56.4. The index was also at its highest level in over a decade.

Friday’s reading comes in line with recent comments from Premier Li Qiang, who said that an economic recovery picked up pace in March after a somewhat sluggish start to the year.

But Friday’s data also shows that an economic recovery so far has been largely skewed towards the services sector. The manufacturing sector, which acts as a bellwether for the Chinese economy, is still lagging behind.

Premier Li said that the government will continue rolling out measures to encourage local spending and shore up economic growth, which is expected to keep demand for services elevated in the near-term.

But the manufacturing sector faces headwinds from slowing demand for Chinese exports, as high interest rates and inflation dent economic growth across the world. While local businesses cheered the relaxation of most anti-COVID restrictions earlier this year, the country’s factories were still running below capacity.

This also saw industrial profits dip in the first two months of the year.