The industrial activity of China expanded at a slower pace in March, official data showed on Friday, raising questions about the strength of the sector’s post-Covid recovery amid weaker global demand and a housing market slowdown.
The services sector was stronger, with activity expanding at the fastest pace in nearly 12 years after the end of China’s Covid-zero policy in December, boosting transport, accommodation and construction.
O Purchasing Managers Index (PMI) industry official stood at 51.9, compared to 52.6 in February, according to data from the National Statistics Agency, above the 50 mark that separates expansion and contraction of activity on a monthly basis.
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That slightly beat the 51.5 forecast by economists in a Reuters poll and sent the yuan strengthening against the dollar. The February number grew at the fastest pace in over a decade.
China’s economic activity accelerated in the first two months of 2023 as consumption and infrastructure investment fueled the recovery after the end of Covid-19and retail sales picked up again.
Economists at Nomura said the strong data suggested China’s economy had reached a “sweet spot” after the end of housing tightening measures and the Covid-zero policy.
“However, amid rapidly escalating geopolitical tensions and financial concerns outside China, this may not last long,” they added in a note.
Businesses face challenges including weak demand, constrained capital availability and high operating costs, and the foundations for an economic recovery need to be laid, the statistics agency said in a statement.
While business and consumer sentiment is starting to improve, the manufacturing sector remains under pressure amid sluggish global demand and high costs.
Industrial activity was affected by the slowdown in production growth and customer demand, with the production and new orders sub-indices showing declines from February levels.
In contrast, the non-manufacturing PMI jumped to 58.2 from 56.3 in February, reaching the highest level since May 2011 as the services sector recovered.
“The strong momentum is likely to continue in the coming months as the new order index for the services sector continued to rise,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
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