Official PMI Surveys Show Strong Expansion in Manufacturing, Services

Activity in China’s manufacturing sector grew at the fastest pace in almost five years in March and the services sector showed the strongest increase since mid-2014, government data showed on Friday, adding to evidence of a recovery in the world’s second-largest economy.

The official Purchasing Managers’ Index (PMI), published by the National Statistics Bureau (NBS), stood at 51.8 in March, up from 51.6 in February. That was the highest reading since April 2012 and well above the 50 mark that divides expansion from contraction. The non-manufacturing PMI, also published by the NBS, stood at 55.1, up from 54.2 in February and the strongest reading since May 2014.

Caixin will publish its own manufacturing PMI survey for March on April 1 and its services PMI on April 6. The manufacturing index, which focuses more on light industry, rose to 51.7 in February from 51.0 in January, while the services index slipped to 52.6 from 53.1. Both indices are compiled by IHS Markit, an international information and data analytics provider.

The statistics bureau noted several factors that contributed to the improvement in manufacturing activity — better market demand; strong expansion among companies in the high-tech sector and continued recovery in traditional heavy industries such as oil refining and ferrous metals smelting; an improvement in imports and exports; a slowdown in the pace of increase in raw-material prices.

The output sub-index rose to 54.2 from 53.7, the highest reading since July 2014, while the gauge of new orders increased to 53.3 from 53.0 and export orders rose to 51.0 from 50.8. The sub-index of input prices declined for the third straight month and stood at 59.3 in March, down from a peak of 69.6 in December.

The employment sub-index rose to 50.0, the first time the reading has not showed a contraction since May 2012. Any sustained increase in the gauge would be good news for the government which is under pressure to create 11 million urban jobs this year to absorb the record number of graduates leaving college and the millions of workers set to be laid off in the overhaul of state-owned enterprises.

But the jobs picture was less optimistic in the non-manufacturing sector. The NBS survey showed the employment sub-index falling for the fourth straight month to 49.1 from 49.7 in February, and the third straight below-50 reading. The decline was particularly strong in the building sector, where the employment gauge declined by 6.3 points to 50.8, suggesting that the construction industry could be heading for a slowdown as the government steps up curbs on the real-estate market and investment growth eases.

The services sector, which includes real-estate development, has become an increasingly important part of China’s economy, and last year accounted for just over half of the country’s economic output according to official data. Services industries are more labor-intensive than manufacturing and policy makers are banking on the sector to provide more jobs.

Contact reporter Song Shiqing (shiqingsong@caixin.com)