China: Non-manufacturing PMI up in March, manufacturing PMIs down

China Macro: Official non-manufacturing PMI jumps to 12-year high

Last Friday, China’s official PMIs for March came in stronger than expected. That was particularly true for the non-manufacturing PMI, covering the services and construction sectors. This index rose by almost two points to a 12-year high of 58.2 (February: 56.3, consensus: 55.0). This reflects China’s domestic reopening rebound following the abandonment of Zero-Covid initiated in December 2022. This rebound is led by services such as transport, tourism and entertainment (which was also illustrated by the improvement shown in retail sales data over January and February), but also by construction – on the back of ongoing public support for infrastructure. The improvement in the non-manufacturing PMI also drove the official composite PMI, a weighted average of the output components for both manufacturing and non-manufacturing, up to a record high of 57.0 (February: 56.4), despite the drop in the official manufacturing PMI (see below).

Manufacturing PMIs down as global demand cools

China’s manufacturing PMIs for March – covering the industrial sectors –showed a less buoyant picture. The official manufacturing PMI published by NBS on Friday fell by 0.7 point to 51.9 (February: 52.6, consensus 51.6), while Caixin’s equivalent published today fell by 1.6 point to the neutral 50 mark separating expansion from contraction (February: 51.6, consensus: 51.4). Although China’s industrial sectors also profit from the domestic reopening rebound, they still face headwinds from the slowdown in developed markets following an unprecedented pace of monetary tightening. That is visible in the decline of the export subindices in both manufacturing surveys, with Caixin’s exports sub-index dropping back to contraction territory in March. To conclude, the divergence between the official and Caixin’s equivalents for the manufacturing PMI seen in March is partly explained by the fact that Caixin’s survey has a stronger focus on export-oriented firms, while the official survey has a stronger coverage of large state firms which are on average less reliant on exports. Caixin's services/composite PMIs will be published coming Thursday. See the China coverage in our March Global Monthly for more background on our China view.