China’s Consumers Boost Its Economic Recovery
China’s economic recovery picked up a surprising amount of steam in March, boosted by strong domestic consumption and unquenchable foreign demand for Chinese-made goods.
The country’s official manufacturing purchasing managers index, a gauge of factory activity, hit a three-month high of 51.9 in March, topping February’s reading of 50.6 and the 50 mark that separates expansion from contraction, according to data released Wednesday by the National Bureau of Statistics. Economists polled by The Wall Street Journal had forecast a reading of 51.2.
More encouraging for China’s leaders, who have been eager to rebalance the economy toward consumer spending after a year in which manufacturing drove the recovery, a parallel gauge of services and construction activity jumped even more in March, suggesting a broadening of consumer activity.
The official nonmanufacturing PMI surged to 56.3 from February’s 51.4 reading, the statistics bureau said Wednesday. That is the highest reading in four months.
Since the coronavirus shut down China’s economy in early 2020, the world’s second-largest economy has powered back on the strength of its factories, which have churned out pandemic-related medical equipment and computer gear for export.
That strength has largely carried over into 2021, even as much of the world has adjusted to pandemic life. In March, the PMI subindex for exports, which had slipped into contraction territory in the previous month, returned to expansion with a reading of 51.2—a move that economists attributed to stimulus measures in the U.S. and other large economies.
Factory production climbed, too, in March after China’s Lunar New Year holiday came to an end. Though many workers remained at their posts during the weeklong holiday this year at the encouragement of the authorities, the postholiday boost was perceptible, with the subindex measuring a production increase to 53.9 from 51.9 in February. Total new orders, meanwhile, increased to 53.6 from 51.5 in the previous month.
In the nonmanufacturing realm, the official subindex measuring business activity in the service sector strengthened to 55.2 in March, from a relatively subdued reading of 50.8 in February, as China brought a resurgence of infections under control.
Analysts expected the strong PMI numbers on Wednesday to help China’s economy finish the first quarter on a high note. In the first quarter of 2020, China’s economy shrank by 6.8% compared with a year earlier, as the country reeled from the initial shock of the coronavirus.
Last year’s historic contraction sets China up to record a sizable year-over-year jump when it reports first-quarter gross domestic product on April 16. Some economists are expecting China to report year-over-year growth of 15% or more in the first quarter and 8% or more for the full year.
Despite the encouraging numbers released Wednesday, some economists questioned the sustainability of the recovery, particularly in the export sector.
“The current strength of exports is likely to unwind over the coming quarters as vaccinations allow a return to more normal global consumption patterns,” Julian Evans-Pritchard, an economist with Capital Economics, told clients in a note Wednesday.
Nomura economists, too, expect both the manufacturing and nonmanufacturing PMIs to moderate in April. As a result, they said, Wednesday’s better-than-expected numbers were unlikely to affect Beijing’s monetary policy, which has tilted toward not withdrawing last year’s stimulus measures. The economists said they expected “no sharp shift” in the coming months.