China's manufacturing sector surged in March, marking its most rapid expansion in 13 months, according to a private survey released. The Caixin/S&P Global manufacturing Purchasing Managers' Index (PMI) rose to 51.1, up from 50.9 in February, surpassing analysts' expectations of 51.0. This growth trend signals the fifth consecutive month of expansion, with the 50-point threshold indicating growth rather than contraction.
This robust performance follows encouraging export and retail sales data, indicating a promising beginning to the year for the world's second-largest economy. Citi responded by revising its growth forecast for China in 2024 upwards, from 4.6% to 5.0%, citing recent positive economic indicators and policy measures.
Premier Li Qiang set an ambitious target of around 5% economic growth for 2024 during China's parliamentary meeting in March. However, analysts caution that achieving this goal will necessitate additional stimulus, as the statistical base effect from 2022, which inflated growth data in 2023, will not be present. Additionally, a substantial downturn in the property sector continues to act as a significant drag on economic activity.
The PMI survey highlighted accelerated growth in manufacturers' output and new orders last month, with external demand also rising. This surge pushed the gauge for new export orders to its highest level since February 2023.
Business confidence regarding the year ahead reached its highest point since April 2023, bolstered by positive news such as a reduction in input costs. Wang Zhe, Senior Economist at Caixin Insight Group, attributed this to a drop in raw material prices, which reduced production costs for manufacturers, allowing them to adjust prices amid fierce market competition.
Despite this optimism, companies exercised caution regarding hiring, as indicated by the persistent negativity in the sub-index for employment since August last year.