Industry PMI Photo:VCG

China's private Caixin Manufacturing Purchasing Managers' Index (PMI) dropped to 48.1 in March from 50.4 in February, which is the quickest decline seen since February 2020, signaling a dampened manufacturing performance due to the latest domestic COVID-19 flare-ups. The reading is in line with the figures the official National Bureau of Statistics (NBS) released on Thursday.

According to the report released by Caixin, the drop further signaled a deterioration in business conditions, with the fall in production at Chinese manufacturing firms with the rate of contraction being the steepest seen in 25 months. 

Meanwhile, the outbreaks and restricted epidemic prevention measures have significantly affected both supply and demand, especially the obstacles with logistics and the lingering global uncertainty. 

The disruption to business operations and logistics due to containment measures caused further deterioration in average supplier performance, while new orders likewise fell at the sharpest rate since February 2020 in March, said the report. 

The report noted that companies said both domestic and foreign demand had waned, and greater market uncertainty due to the current international situations with lower sales led firms to cut back on their purchasing activity. 

As for supply, domestic outbreaks and tightened restrictions measures further pressured capacities, as backlogs of work rose slightly for the second month in a row.

Wang Zhe, senior economist at Caixin Insight Group, noted that shrinking manufacturing sector disrupted manufacturing supply chains and production, while the market demand weakened especially in consumer goods. 

Moreover, Wang noted that the inflationary pressure increased due to the ongoing Russia-Ukraine conflict and subsequent sanctions against the former disrupted supply chains and largely pushed up commodity prices. 

However, the job market improved marginally in March, said Wang, noting that the employment gauge climbed into positive territory for the first time since July 2021. 

Overall, manufacturers have a positive outlook for their businesses, according to Wang, following surveyed entrepreneurs' confidence that authorities would get the domestic outbreaks under control. 

According to the NBS, the official manufacturing PMI in March retreated to 49.5, down 0.7 points from the previous month. The non-manufacturing PMI fell to 48.4 from 51.6 in February.

Global Times