China factory activity drops to four-month low in March: Caixin

Employees work on a concrete mixing truck at a factory in Zhangjiakou in China's northern Hebei province

Beijing (AFP) – Chinese manufacturing activity slowed in March as weak demand weighed on the world’s second largest economy, independent data showed Monday.

The Caixin Purchasing Managers Index (PMI) — an indicator of conditions at small manufacturers — dropped to 51.0 in March, down from 51.6 in February, marking the weakest reading since November.

A PMI figure above 50 represents growth while anything below points to contraction.

New order growth slowed due to weak foreign demand, and the pace of production level growth slackened, according to a Caixin statement with data compiler IHS Markit.

Inventories of finished items inceased marginally while employment dropped.

“Demand was not as strong as expected, leading to lower willingness of manufacturers to produce and restock,” Caixin analyst Zhengsheng Zhong wrote.

“The growth momentum of the Chinese manufacturing economy may have weakened in March, but at a marginal pace.”

The government’s official PMI reading Saturday of 51.5 beat forecasts, suggesting factory activity expansion quickened in March.

“We suspect that the official PMI, which is skewed toward firms in heavy industry, has benefited from the easing of winter pollution controls,” Julian Evans-Pritchard of Capital Economics said in a research note.

“We tend to put more weight on the Caixin PMI since the index typically does a better job capturing broader cyclical trends in economic activity.”