BEIJING • Activity in China's manufacturing sector unexpectedly expanded at the fastest pace in nearly five years in March, adding to evidence that the world's second- largest economy has gained momentum early this year.
The official Purchasing Managers' Index (PMI) rose to 51.8 in March from the previous month's 51.6, well above the 50-point mark that separates growth from contraction on a monthly basis. The reading was stronger than the 51.6 that economists had expected and the highest since April 2012.
Non-manufacturing PMI rose to a two-year high of 55.1 from 54.2 in February, the National Bureau of Statistics (NBS) said yesterday.
The new strength follows a factory rebound since mid-2016, while industrial output and private investment also have picked up. Still, the brighter picture has been boosted by surging producer prices that may be close to peaking, and the government will have to deal with the hangover of the investment- driven growth.
"Last year's stimulus has done the trick and it's increasingly looking like the growth uptick is broadening out beyond the initial impact of the stimulus," according to Mr Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "It's consistent with policymakers continuing to tap the brakes."
China has reported a slew of upbeat data so far this year, even as Beijing tries to rein in speculative bubbles in the red-hot property market and control risks in the broader financial market from years of debt-fuelled stimulus.
A surprise rebound in home sales and stronger infrastructure investment have added fresh impetus to a months-long construction boom that has lifted demand for building materials from cement to steel and helped reflate prices of industrial commodities worldwide.
Recent industrial profit data showed combined earnings rose almost 32 per cent in the first two months of the year from a year ago, the highest in nearly six years. But fresh government curbs to further cool the property market in recent weeks are expected to dampen housing demand and prices eventually.
"This strength probably won't last," Mr Julian Evans-Pritchard, China economist at Capital Economics, wrote in a note. "The correction in the property market still has much further to run which, in combination with policy tightening, will drive a slowdown in investment and industrial activity during the coming quarters."
New orders rose to a near three-year high of 53.3 from 53, the NBS said. New export orders rose to 51, the highest in almost five years. Input prices fell a third month, falling to 59.3 after hitting a five-year high in December.
That suggests producer prices may be peaking at an eight-year high, said Mr Raymond Yeung, chief greater China economist at Australia & New Zealand Banking.
Stronger market demand, expanding high-technology activity and improving conditions in traditional heavy industries all contributed to the stronger reading, the NBS said.