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Chinese manufacturing activity expands for the first time in 6 months

More signs of renewed life in the Chinese and Japanese economies with the two surveys of business activity showing improvement in March.

The official survey of big companies conducted by the National Bureau of Statistics (NBS) produced the most interesting results as China’s manufacturing activity expanded for the first time in six months in March.

The other survey by the Caixin business magazine showed a further growth in activity. This survey polls small and medium businesses and has been more positive than the NBS survey for the past couple of months.

The NBS survey of manufacturing showed a rise to 50.8 in March from 49.1 in February, above the 50-mark separating growth from contraction and topping a forecast of 49.9.

The official non-manufacturing survey produced a stronger result from China’s growing services sector (which includes the depressed construction sector) and construction, with a rise to 53 from 51.4 in February, marking the highest reading since September last year.

The combined survey showed an improvement as well – jumping to 52.7% from 50.9 in February, but falling short of market estimates of 53. March’s reading was rthe best since May, 2023.

The Caixin survey showed the strongest expansion in 13 months with a reading of 51.1 (up from 50.9 in February).

The outcome was above analysts’ forecasts of 51.0 and marking an expansion for the fifth consecutive month.

Expansion in manufacturers’ output and new orders accelerated last month, the PMI survey showed. External demand also picked up, pushing the gauge for new export orders to its highest level since February 2023.

Businesses’ confidence towards the year-ahead rose to its highest point since April 2023.

However, companies were cautious about adding employees, and the relevant sub-index has remained negative since August last year.

First quarter GDP and March economic data will be out next week and early the week after.


Meanwhile the quarterly Tankan survey from the Bank of Japan showed a surge in confidence across country’s service sector.

In fact the results showed that business sentiment among Japan’s major non-manufacturers improved to a more than three-decade high in the first quarter.

But big manufacturers’ sentiment soured for the first time in four quarters due in part to auto production disruptions, according to the Tankan survey.

The outcome of the survey is being given prominence ahead of the next Bank of Japan policy meeting on April 25 and 26 after the central bank abandoned negative interest rates and started tightening monetary policy at its March meeting.

The data will feed into updated economic forecasts from the central bank after the country ruled off its 2023-24 financial year on Sunday.

The headline sentiment index for big manufacturers eased to a reading of +11 in March from +13 in December, the tankan survey showed, compared with a median market forecast for a +10 reading.

The index gauging big non-manufacturers’ sentiment improved to +34 in March from +32 three months ago, slightly exceeding a market forecast of a reading of +33.

It was the highest reading since August 1991, when Japan’s economy was booming from an asset-inflated bubble which was starting to collapse at that time to produce the country’s 30 unwanted years of gloom.

Both big manufacturers and non-manufacturers expect conditions to worsen three months ahead, the survey showed.

Big firms said they expect to increase capital expenditure by 4.0% in the fiscal year starting in April, against median forecasts of a 9.2% rise, the survey showed.

Japan’s economy grew at an annualised 0.4% rate n the December quarter of 2023, narrowly averting a technical recession as robust capital expenditure offset weak household consumption.

Analysts expect the economy to have barely grown in the March quarter as rising living costs hurt consumption, and output disruptions at some auto factories weighed on industrial production.

But the largest wage rises for more than a quarter of a century were handed out in the annual Spring negotiating period from January through March and that doesn’t seem to have had any impact on sentiment in the latest Tankan survey.

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