China's Caixin Manufacturing PMI plunges to four-month lows, a negative surprise

China's March Caixin manufacturing PMI came in at 51.0 vs. 51.7 expected and 51.6 last, with the production and total new orders both expanded at the weakest rates for four months.
Summary

Chinese manufacturing companies signaled only a marginal improvement in overall operating conditions at the end of the first quarter. Production and total new orders both expanded at the weakest rates for four months, while export sales increased only marginally. At the same time, staff numbers declined at the quickest pace since last August amid reports of cost-cutting plans. Overall inflationary pressures meanwhile cooled further, with input costs increasing at the slowest rate for nine months, while firms raised their selling prices only modestly. Encouragingly, confidence towards growth prospects improved to a one-year high amid forecasts of greater investment and expectations of better market conditions.

Adjusted for seasonal factors, the headline Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single figure snapshot of operating conditions in the manufacturing economy – posted 51.0 in March, down from 51.6 in February. Although the reading signaled a further improvement in the health of the sector, the latest upturn was only slight and the weakest recorded since last November.

The amount of total new work placed with Chinese manufacturers increased again in March, though the pace of expansion softened to a four-month low. Weaker growth in overall new orders was in part driven by relatively muted foreign demand, as new export work increased only slightly at the end of the first quarter.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “The Caixin China General Manufacturing PMI fell to 51.0 in March. The sub-indices of output and employment both fell from the previous month, while new orders increased at a slightly slower rate, highlighting that the deceleration in the manufacturing sector was mainly driven by the supply side and that demand has remained relatively stable. Output prices rose at a faster pace in March than in the previous month while the increase in input costs weakened markedly, which will help shore up manufacturers’ profits.”