Caixin China General Manufacturing PMI (March 2021)

Manufacturing output continues to expand modestly in March

Key findings

• Production increases again amid further uptick in sales

• Export orders rise for first time in three months

• Inflationary pressures pick up

Data were collected 12-23 March 2021

Chinese manufacturing companies signalled a further improvement in operating conditions in March. Production and new orders continued to expand, albeit at mild rates, while employment moved closer to stabilisation. New export business meanwhile returned to growth, as global economic conditions continued to recover from the coronavirus disease 2019 (COVID-19) outbreak. At the same time, inflationary pressures intensified, with both input costs and output charges rising at steeper rates.

At 50.6 in March, the headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – signalled a sustained improvement in the health of China's manufacturing sector. The reading was down from 50.9 in February, however, to indicate a marginal rate of improvement that was the softest seen in the current 11-month period of expansion.

As has been the case in each of the past 13 months, Chinese manufacturers increased production during March. The rate of growth edged down to an 11-month low and remained modest overall. Firms frequently mentioned that a further recovery from the pandemic and rising customer orders had supported the latest upturn.

Total new work likewise expanded at a fractionally weaker pace than in February, and only slightly overall. Underlying data suggested that a softening of domestic demand was largely offset by increased foreign sales, which rose for the first time in three months. Companies often mentioned that overseas demand had picked up as global economic conditions continued to recover from the COVID-19 outbreak.

The sustained upturn in new orders led to renewed pressure on capacities, with backlogs of work rising modestly after a marginal drop in February. Concurrently, the rate of job shedding eased to a marginal pace. Where lower staff numbers were reported, it was often linked to the non-replacement of voluntary leavers.

After a solid deterioration in February, average vendor performance deteriorated only marginally during March. Notably, the degree to which delivery times lengthened was the softest since last June.

Although supply chain disruption eased, firms reported a sharp and accelerated rise in input costs during March amid reports of greater raw material prices. Notably, the rate of cost inflation was the steepest recorded for 40 months. Consequently, firms raised their selling prices and at the most marked rate since November 2016.

Input buying fell for the first time in 11 months in March, albeit only fractionally. A number of firms commented on having sufficient stocks in the latest survey period. On the inventories front, stocks of inputs fell marginally, while stocks of finished items were broadly stable.

Looking ahead, manufacturers were highly confident that output would continue to rise over the next year, with the level of positive sentiment among the highest seen over the past seven years. Growth projections were heavily linked to expectations that the pandemic will end, and that global demand will recover.

Comment

Commenting on the China General Manufacturing PMI data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Manufacturing PMI came in at 50.6 in March, down from 50.9 the previous month. The March reading was the lowest since April 2020, despite marking the 11th consecutive month of expansion. That indicates the post-epidemic recovery was continuing to falter.

1. Both supply and demand in the manufacturing sector continued to expand, but the pace of expansion has slowed for four straight months. Overseas demand became a bright spot, with the gauge of new export orders reaching into positive territory for the first time this year. Surveyed manufacturers said overseas demand largely increased as the epidemic situation improved.

2. The slower growth in both supply and demand added pressure to the labor market. Employment in March shrank for a fourth straight month, though at a slower pace than in February. Employment remained low because manufacturers weren’t very motivated to replace departing workers.

3. The gauges for input and output prices both rose at a faster pace, indicating added inflationary pressure. Prices of raw materials, including industrial metals and crude oil, further rose, causing costs for manufacturing enterprises to soar. The gauge for input costs in March hit the highest level since November 2017. As a result, the gauge for factory gate prices reached the highest since November 2016. Surveyed companies said that rising prices also suppressed any further recovery of demand.

4. The economic slowdown further weakened manufacturers’ motivation to replenish their stocks. The measure for stocks of purchased items remained in negative territory for the third consecutive month, and the measure for quantity of purchases plunged into contractionary territory. Stocks of finished goods remained stable. The gauge for suppliers’ delivery times increased, though it was still in negative territory, indicating that logistic delays were getting shorter.

“Overall, the manufacturing sector continued to recover in March, but the momentum of both supply and demand weakened. Overseas demand largely improved. The sector remained under employment pressure. Manufacturing enterprises were still confident that the economy will continue to recover and that the pandemic will be brought under control, with the gauge for future output expectations exceeding the long-term average. We should pay attention to inflation in future as the gauges for input and output prices have been rising for several months. The growing inflationary pressure limits the room for future policies and is not a good thing for sustaining an economic recovery in the post-epidemic period.”

Contact

Dr. Wang Zhe

Senior Economist

Caixin Insight Group

+86-10-8590-5019

zhewang@caixin.com

Ma Ling

Senior Director

Brand and Communications

Caixin Insight Group

T: +86-10-8590-5204

lingma@caixin.com

Annabel Fiddes

Associate Director

IHS Markit

T: +44 1491 461 010

annabel.fiddes@ihsmarkit.com

Katherine Smith

Public Relations

IHS Markit

T: +1-781-301-9311

katherine.smith@ihsmarkit.com

About Caixin

Caixin is an all-in-one media group dedicated to providing financial and business news, data and information. Its multiple platforms cover quality news in both Chinese and English.

Caixin Insight Group is a high-end financial research, data and service platform. It aims to be the builder of China’s financial infrastructure in the new economic era

For more information, please visit www.caixin.com and www.caixinglobal.com.

About IHS Markit

IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers nextgeneration information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd. and/ or its affiliates. All other company and product names may be trademarks of their respective owners © 2020 IHS Markit Ltd. All rights reserved.

About PMI

Purchasing Managers’ Index™ (PMI™) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and

business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

If you prefer not to receive news releases from IHS Markit, please email katherine.smith@ihsmarkit.com. To read our privacy policy, click here.

Disclaimer

The intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/ or its affiliates.

Download the report in PDF