China’s manufacturing sector sees growth amid pandemic restrictions

Image credit: S&P Global

The Caixin China General Manufacturing PMI has increased to 51.6 in February 2023 from 49.2 in January, marking the first uptick in the sector since last July and the highest reading in eight months, after an abrupt shift in COVID policy. 

Firms signalled renewed and solid upturns in both production and new orders as operations and customer demand revived, according to the latest S&P Global report. 

Also, new improvements were seen in purchasing activity and employment, while lead times reduced to the greatest extent in eight years and pressure on supply chains decreased.

The higher headline index reading was boosted by a renewed increase in production volumes in February, marking the first upturn in output since last August, with the rate of expansion the steepest since June 2022.

Similarly, new orders expanded for the first time in seven months, with the reading the second-highest recorded by the survey since May 2021.

The recent rollback of pandemic restrictions and the ensuing improvement in demand circumstances were connected to higher sales. 

Businesses also noticed a rise in new export orders for the first time since July 2022, which indicates improved international demand for Chinese manufactured goods.

Meanwhile, employment climbed for the first time in 11 months, with backlogs of work rising at the quickest rate in 16 months. 

Purchasing activity levels rose for the first time in four months, and the fastest pace since June 2021 with a number of firms mentioning the increased usage of current input inventories to supplement production, as well as of finished goods to fulfil incoming new orders.

Delivery times improved to the greatest extent in eight years. On inflation, both input and output cost inflation accelerated. 

Moreover, for the first time since last June and by the most amount in eight years, input delivery times on average improved.

“Optimism continued to improve among manufacturers in February. The reading for their expectations for future output reached a high not seen since March 2021. They expressed strong confidence in a post-Covid economic recovery,” said Dr Wang Zhe, senior economist at Caixin Insight Group.

Zhe noted that in the coming period, relevant policies should concentrate more on raising household income and raising market expectations.