China factory gauge rebounds as business confidence improves

Premier Li Keqiang. (Bloomberg pic)

BEIJING: The first official gauge of China’s manufacturing sector rebounded in March, signalling stabilisation in the economy as policy stimulus takes hold.

The manufacturing purchasing managers index rose to 50.5 from 49.2 last month, the biggest jump on month since 2012.

The non-manufacturing PMI – a gauge of services and construction – stood at 54.8 versus 54.3 in February. Readings above 50 signal expansion.

Key insights

The release backs up the signs of recovery seen in the earliest data on the economy, which showed business confidence and stock markets improving amid policy support and progress in the China-US trade talks.

Premier Li Keqiang told business people last week that March economic indicators would show “signs of visible improvement,” with the economy doing better in the first quarter than the government expected.

Activity in March was probably boosted by the timing of the Lunar New Year, with a rebound after the holiday in early February.

“We expect a stabilisation of aggregate demand growth,” Eva Yi and Yuan Yue at China International Capital wrote in a recent note.

“Stabilisation in cyclical momentum is underpinned by a steady pace of monetary expansion and more effective fiscal loosening on the way.”