BEIJING • China's official factory gauge showed improving conditions for the first time in eight months, suggesting the government's fiscal and monetary stimulus is kicking in.
The manufacturing purchasing managers' index (PMI) rose to 50.2 last month, compared with a median estimate of 49.4 in a Bloomberg News survey of economists. The measure matches its highest level since November 2014.
The non-manufacturing PMI rose to 53.8 from 52.7 in February.
Top officials at the National People's Congress last month unveiled a record fiscal deficit and pledged to accelerate restructuring of bloated state-owned industries to meet their 6.5 per cent to 7 per cent expansion target for this year.
The monetary authorities have flagged more room to act if growth falters. "People were worried about a hard landing at the start of the year, but after the National People's Congress, the expectation now is that the government won't let growth slide below the bottom line of 6.5 per cent," said Mr Ding Shuang, chief China economist at Standard Chartered in Hong Kong.
"Monetary policy will stay easy, helping business confidence."
Seasonal volatility is one factor behind the rebound, according to a National Bureau of Statistics (NBS) statement released with the data, as factories started to run machines again after the Chinese New Year holiday in February.
"Some positive signs are showing up," an NBS statistician said in the statement. "At the same time, there are still considerable difficulties in businesses."
Ms Su Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong, said the report should be interpreted with caution, citing a decline in the employment sub-index of the non-manufacturing measure.
"There is evidence that the great rebalancing is stalling," she said.
A separate, private PMI reading from Caixin Media and Markit Economics rose to 49.7 last month to the highest level since February last year. As with the official measure, readings above 50 signal improving conditions.
In the official report, measures of manufacturing output, new orders, new export orders, purchasing quantity and input prices all rebounded from February.
A rebound in property sales and turnaround in property investment "is likely the biggest driver", said Ms Julia Wang, an economist with HSBC Holdings in Hong Kong.
"A stronger fiscal impulse to support infrastructure investment spending also offered support. We expect both monetary and fiscal easing to continue to support the recovery in the coming months."
More tax cuts are expected to boost consumption and support firms. The stronger-than-expected gains add to confidence that Chinese growth has stabilised, said Mr Shane Oliver of AMP Capital Investors in Sydney.
He said that a big acceleration will require more stimulus measures going forward.
BLOOMBERG
