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March survey data pointed to only a fractional deterioration in operating conditions faced by Chinese manufacturers. A renewed expansion in total new order books led to the first increase in output for a year. However, firms continued to cut their staff numbers, with the rate of job shedding easing only slightly from February’s seven-year record.
Companies also maintained relatively cautious stock policies, with inventories of inputs and finished goods both falling again in March. Meanwhile, companies signalled renewed inflationary pressures as both input costs and prices charged rose for the first time since July 2014, albeit at modest rates.
The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered 49.7 at the end of the first quarter, up from 48.0 in February. Despite remaining below the crucial no-change 50.0 value, it was the highest index reading in 13 months and signalled only a fractional deterioration in the health of the sector.
Manufacturing production in China increased for the first time in a year during March, albeit at a marginal pace. Higher output was supported by a renewed rise in total new work. As was the case for output, however, the rate of expansion was marginal. Some companies commented on an improvement in underlying client demand. Weak foreign demand remained a drag on new order growth, however, with new export business falling for the fourth month in a row.
Chinese goods producers continued to cut their payroll numbers at the end of the first quarter. The rate of job shedding eased only slightly since February’s post-recession record and was solid overall. Lower employment was generally attributed to company downsizing policies that were implemented to cut costs. Higher new orders and lower staff numbers both contributed to a slight increase in the level of work-inhand (but not yet completed) in March
