BEIJING: Chinese factory activity accelerated in March, official data showed Friday, the latest sign of improving momentum in the world’s second-largest economy but analysts warned of headwinds later down the line.
The figures are the most recent to suggest that a years-long growth slowdown, which has had knock-on effects globally, could be easing, although there are also concerns about the outlook for world trade caused by US President Donald Trump’s protectionist leanings.
The official purchasing managers’ index (PMI), which gauges conditions at factories and mines, edged up to 51.8, slightly beating the 51.7 forecast in a Bloomberg News survey and up from the previous month’s 51.6.
A figure above 50 indicates growth while anything below points to contraction.
“The manufacturing sector continued to maintain a steady trend,” National Bureau of Statistics (NBS) analyst Zhao Qinghe said in a note, adding that a pickup in production and in demand drove the results.
“High-tech manufacturing continued rapid expansion.”
The results suggest that China’s economy “continued to perform well in March,” said Julian Evans-Pritchard of Capital Economics in a note, adding that the data show labour-market conditions have also improved.
But he noted that the strength “probably won’t last” as a looming property-market correction and a tightening of monetary policy will squeeze industrial activity later in the year.
Analysts with ANZ noted the positive results were boosted in part by a rally in commodity prices that is “reaching (its) limit” and predicted a softening of producer price growth.
“The return of investment-driven growth is not welcome from the policymakers’ point of view,” they added.
Friday’s reading follows data showing a surge in imports last month while economic growth came in slightly better than expected at the end of 2016.
Beijing has said it wants to reorient the economy away from relying on debt-fuelled investment and towards a consumer-driven model, but the transition has proven challenging, leading to the slower growth readings in recent years.
However, there is growing uncertainty about the future owing to Trump’s promises to revise global trade deals and his past accusations of China being a currency manipulator.
Chinese President Xi Jinping is pencilled in to meet Trump in Florida next week, when trade and economic issues are expected to dominate the agenda.
On Thursday, Trump predicted on Twitter the meeting would be “very difficult”, adding: “We can no longer have massive trade deficits… and job losses. American companies must be prepared to look at other alternatives.”