Markit/Caixin’s PMI report shows recovery in China’s economy in March. The composite output index rose to 52.9 in March, from 50.7 in the prior month. This marks the highest level since June 2018. While the manufacturing sector returned to the expansionary territory, services activities also showed stronger growth.

It is likely that GDP growth in 1Q19 would stage a rebound from 4Q18. However, we remained cautious about the growth in the second quarter as well as the second half of the year.

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The official NBS manufacturing PMI climbed +0.9 point to 50.8 in March. The improvement in the manufacturing sector was broadly based. For instance, the new orders sub-index rose to the highest level in 4 months, while the new exports orders sub-index drifted back above 50 (indicating expansion). Improvement in the above two sub-indices signaled rebound in both domestic and foreign demand for Chinese goods. The employment sub-index soared to the highest level since January 2013.

On the services sector, the PMI jumped to 54.4 in March from 51.1 in the prior month. Looking into the details, the new business sub-index rose to the highest level since January 2018 while the business expectations sub-index climbed modestly higher. However, concerning the employment situation, the corresponding sub-index softened a bit, despite staying in the expansionary territory.

Recall that the Markit/ Caixin PMI focuses on small and medium firms, while NBS’ official report surveys on large corporations. For the latter, the overall composite index improved +1.6 points to 54 in March. Meanwhile, both manufacturing and services activities rebounded during the month. Returning to expansion, the manufacturing PMI climbed +1.3 points to 50.5 while the services PMI gained +0.5 point to 54.8.


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