PMI, which tracks large, state-owned enterprises, rose to 51.8 from 51.6 in the previous month. It was the highest reading since April 2012. The figure beat many analysts’ forecasts, with a Reuters poll predicting a reading of 51.6. A figure above 50 signals growth in the manufacturing sector, while a reading below 50 indicates contraction.
The official data showed that output, new orders, new export orders, purchases and imports expanded. Stocks of finished goods, major inputs and backlogs of orders contracted. Input prices and ex-factory prices rose as suppliers’ delivery time quickened.
The encouraging PMI reading is further evidence of an upswing in the industrial sector and suggests the Chinese economy is gaining momentum. A construction boom has increased demand for building materials, but the risk remains that new government policies aimed at cooling the housing market could dampen demand.
Manufacturing is expanding in China, due to an uptick in demand domestically and internationally. Benjamin Cavender, principal at China Market Research Group, is optimistic about the country’s economic outlook.
“This is a very positive sign for China’s economy. It shows that not only has domestic consumption continued to hold up, but that international demand has also picked up as well. This has been a huge help for Chinese manufacturers who had struggled over the last few years because of excess production and weak demand,” he said.
“I think we are seeing an improvement, both because real demand has picked up and also because there has been a consolidation on the production side of things, with more marginal businesses going out of business or cutting back operations.”
“Apparel retailers, at least those that have made an effort to optimize their inventory and production planning, should do well this year,” he said.
The past week also saw the announcement of state-mandated minimum wage increases in two different areas. Starting April 1, the monthly minimum wage in Shanghai will be set at 2,300 renminbi ($333) up from 2,190 yuan ($318). From May 1 onwards, in the northwestern Shaanxi province, minimum monthly wage levels will be adjusted to 1,380-1,680 renminbi ($200-$244) and will vary by district. That represents an increase of about $30 from current levels.