China - March PMIs signal a broadening recovery

China Macro: Gap between two manufacturing PMIs closes

China’s March PMIs published over the past few days brought further signs of a bottoming out. Caixin’s manufacturing PMI rose modestly by 0.2 points to 51.1 (February: 50.9/consensus: 51.0), but the the most eye-catching change came from the official manufacturing PMI published by NBS. This index rose by 1.7 point to 50.8 (February: 49.1, consensus: 50.1). This was the first reading of this index above the neutral 50 mark separating expansion from contraction since September 2023. It also ended the remarkable divergence, in place since late 2023, between the official manufacturing PMI (with a stronger coverage of large, state-owned enterprises) and Caixin’s version (which focuses more on smaller, private, and export-oriented firms). As we pointed out before (here), the official PMI does appear to have been impacted more in February by the lull in economic activity during the Lunar New Year break. In March, the official manufacturing PMI showed a broad improvement, with the demand side (domestic and export orders) catching up with the supply side. In fact, for the first time since February 2023, the export orders sub-indices were in expansion territory in both the NBS’s and Caixin’s survey.

Services PMIs also show further improvements

The services PMIs also came in stronger than expected, with the biggest surprise again coming from the official survey. The official non-manufacturing PMI, covering the services and construction sectors, rose by 1.6 points to a nine-month high of 53.0 (February: 51.4, consensus: 51.5). The subindex for services continued its upward trend, rising by 1.4 points to 52.4, the highest reading since June 2023. The subindex for construction rebounded by 2.7 points to a three-month high of 56.2. As a result, the official composite PMI (a weighted average of the output components in the manufacturing and non-manufacturing survey) rose to a 10-month high of 52.7 (February: 50.9). Caixin’s services PMI improved modestly, rising by 0.2 points to 52.7 (February/consensus: 52.5), also staying well above the neutral mark. Caixin’s composite PMI rose by 0.2 point to 52.7, also a 10-month high.

All told, the March PMIs signal a broadening of China’s recovery, in line with our expectation that quarterly growth will pick up this year compared to Q4-2023. That said, given the usual volatility in the first months of the year related to Lunar New Year, some caution is still warranted (also reflecting ongoing headwinds from the property sector and a challenging external environment). To conclude, we judge upside and downside risks to our 2024 growth forecast of 4.7% to be more or less balanced at the moment, see for more background our recent monthly China update here.