SME
In March, the manufacturing and non-manufacturing industries rebounded in an all-round way, and the economic activity further improved.
In terms of manufacturing, both supply and demand of the manufacturing industry rose in March, and the market is expected to pick up. Among them, benefiting from the rebound in overseas demand, new orders rebounded super-seasonally, which was the largest source of pull for the manufacturing PMI this month; the resumption of work and production after the holiday led to the rebound of the production index; and the business activities of enterprises, especially small and medium-sized enterprises, are expected to rebound.
In the non-manufacturing sector, the warmer weather and the resumption of work and production have led to a rebound in both the construction and service industries. From the perspective of the construction industry, on the one hand, benefiting from the concentrated start of infrastructure projects after the holiday, the construction industry boom has rebounded, on the other hand, in the context of insufficient real estate demand and local risk prevention, the construction PMI is still at the lowest value since the same period in the past ten years (except 2020). From the perspective of the service industry, the resumption of work and production after the holiday led to the rebound of the production-oriented service industry, and the fading of the holiday factor caused the prosperity of the service industry related to residents' travel to decline.
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China's official manufacturing PMI in March 2024 was 50.8%, compared with 49.1% previously, and the official non-manufacturing PMI was 53.0%, compared with 51.4% previously. The composite PMI was 52.7%, compared with 50.9% previously.
Comments
Driven by the resumption of work and production after the holiday, the manufacturing PMI in March rebounded by 1.7 percentage points from the previous month to 50.8%, the highest value since March 2023. Among them, new orders rose by 4.0 percentage points and 53.0% respectively from the previous month, driving the overall manufacturing PMI to rise by 1.2 percentage points from the previous month, which was the largest source of the recovery of the manufacturing PMI this month.
1. Manufacturing: demand has improved significantly
The manufacturing PMI rebounded by 1.7 percentage points from the previous month to 50.8% in March, standing above the boom and bust line for the first time since September 2023. From the perspective of its sub-indicators, boosted by the improvement of global demand and the resumption of work and production after the holiday, the supply and demand of the manufacturing industry have risen, the market is expected to rebound, and the economic activity has been further improved.
From the perspective of demand, under the combined influence of seasonal factors and the rebound in overseas demand, the manufacturing PMI new orders index in March rebounded by 4.0 percentage points from the previous month to 53.0%, which was the largest source of pull for the recovery of the manufacturing industry this month. From the perspective of seasonal factors, since 2017, except for the years that have been significantly disturbed by the epidemic (2020 and 2022), the new orders index usually rebounds in the second month of the Spring Festival, with a rebound of 0.2 to 3.2 percentage points, and an average recovery of 1.8 percentage points. The new orders index in March 2024 rebounded by 4.0 percentage points from the previous month, the highest increase in the second month of the Spring Festival in recent years.
The new export orders index in March rebounded by 5.0 percentage points from the previous month to 51.3%, the highest value since February 2023, and the improvement in export orders was higher than that of new orders. From the perspective of overseas indicators, the U.S. manufacturing PMI in March rebounded 0.3 percentage points from the previous month to 52.5%, standing above the boom and bust line for three consecutive months, and the rebound in the U.S. manufacturing boom will help global demand rebound. Combined with the export activities of major export-oriented economies, South Korea's exports in the first 20 days of March increased by 11.2% year-on-year, and Vietnam's exports in March rebounded by 19.1 percentage points year-on-year to 15.0%, which also verified the improvement in global demand. In terms of industries, driven by the rebound in overseas non-durable goods replenishment demand and the rebound in the semiconductor cycle, the demand for new orders in the relevant industrial chains in mainland China has improved. According to the Bureau of Statistics, the two indices of chemical fibers, rubber and plastic products, automobiles, and computer communication and electronic equipment were all above the critical point, and the foreign trade business of related industries increased from the previous month[1]. In terms of enterprise types, the new export orders of large, medium-sized and small enterprises generally rebounded, up by 2.7, 6.9 and 11.9 percentage points respectively, and the new export orders of small enterprises improved most significantly, but they were still below the boom and bust line.
In addition, driven by the resumption of work and production after the holiday, the demand for replenishment of enterprises has rebounded. Inventories of raw materials and finished goods rebounded by 0.7 and 1.0 percentage points from the previous month to 48.1% and 48.9% respectively in March, and the rebound in inventory demand also helped the recovery of the manufacturing PMI order index.
From the perspective of production, the resumption of work and production after the holiday has rebounded, and the production activities of enterprises have rebounded. The manufacturing PMI production index rebounded 2.4 percentage points from the previous month to 52.2% in March, the highest value since September 2023. Combined with the observation of seasonal factors, since 2017, except for the years when the epidemic has been significantly disturbed (2020 and 2022), the production index usually rebounds in the second month of the Spring Festival, with a rebound of 0.6 to 6.9 percentage points and an average recovery of 2.6 percentage points. As a result, the recovery in the manufacturing PMI production index in March was basically in line with seasonality.
From the perspective of market expectations, producer business activities are expected to rebound by 1.4 percentage points from the previous month to 55.6% in March, the highest value since February 2023, and business confidence has rebounded further. In terms of enterprise types, medium-sized enterprises and small enterprises are expected to improve significantly, rebounding by 3.4 and 1.5 percentage points from the previous month to 56.6% and 56.8% respectively, while the market expectations of large enterprises are relatively stable, and their production and business activities are expected to record 54.8%, unchanged from the previous month.
2. Non-manufacturing: both the service industry and the construction industry rose
Boosted by the warmer weather and the resumption of work after the holiday, the non-manufacturing business activity index rebounded by 1.6 percentage points from the previous month to 53.0%, and the non-manufacturing prosperity level rebounded.
From the perspective of the construction industry, the construction PMI in March was 2.7 percentage points higher than that of the previous month to 56.2%, and the construction industry rebounded. In terms of industries, the business activities of the civil engineering and construction industry related to infrastructure projects are in a relatively high range. According to the Bureau of Statistics, the business activity index of the civil engineering and construction industry was 59.8%, which was in the relatively prosperous range, and the civil engineering and construction industry continued to maintain a relatively fast construction progress [2]. It is worth pointing out that although the construction PMI rebounded in March, its absolute level is still at the lowest value in the same period in nearly 10 years (except for 2020).
From the perspective of the service industry, the service industry has rebounded but the industry is differentiated. The business activity index of the service industry rebounded by 1.4 percentage points from the previous month to 52.4% in March, indicating that the prosperity of the service industry further improved. On the one hand, driven by the resumption of work and production after the holiday, the prosperity of production-related production services rebounded, and the weekly freight volume of China's railways in March rebounded by 7.576 million tons from the previous month to 74.769 million tons. According to the Bureau of Statistics, the business activity index of postal, telecommunications, radio and television and satellite transmission services, monetary and financial services and other industries is in the high boom range of more than 60.0%. On the other hand, the impact of holiday factors subsided, and the prosperity of the service industry related to residents' travel declined, with the number of domestic flights (excluding Hong Kong, Macao and Taiwan) executed in March decreased by 30,000 from the previous month to 372,000, the lowest value since December 2023.
Annotation:
1. Source: National Bureau of Statistics, "Zhao Qinghe, Senior Statistician of the Service Industry Survey Center of the National Bureau of Statistics, Interprets China's Purchasing Managers' Index for March 2024", 2024-03-31, [2024-03-31], https://www.stats.gov.cn/sj/sjjd/202403/t20240329_1954066.html
[2] National Bureau of Statistics, "Zhao Qinghe, Senior Statistician of the Service Industry Survey Center of the National Bureau of Statistics, Interprets China's Purchasing Managers' Index in March 2024", 2024-03-31, [2024-03-31], https://www.stats.gov.cn/sj/sjjd/202403/t20240329_1954066.html
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