China's factory activity rebounds as work slowly resumes

Marco Green
March 31, 2020

The Purchasing Managers' Index (PMI) rose to 52 in March from the collapse to a record low of 35.7 in February, China's National Bureau of Statistics (NBS) said on Tuesday, and above the neutral 50-point mark that separates growth from contraction on a monthly basis.

The figure is a marked rebound from 35.7 in February - the worst since China began recording the data in 2005. A reading above 50 is traditionally construed as expansion. In February, the index had sunk sharply to 29.6 in China.

The latest data "do not indicate that economic activity has fully recovered", the China Federation of Logistics & Purchasing said in a statement. Its effective measures resulted in minimizing the fast-spread of the virus with businesses gradually resuming operations and contributing to a massive improvement in the indices this month. Year-to-year data showed a significant slowdown, as it was at 0.7 percent in March, against February's 1.2 percent.

The country needs to "understand the unprecedented severity and complexity of the current domestic and global economic situation" and "return to work and production and expand domestic demand", the group said.

Nomura analysts Lu Ting, Wang Lisheng and Wang Jing said in a note ahead of the PMI data release that they expect "deeply negative growth for nearly all activity data in March", given the relatively slow business resumption rate and slump in external demand.

Economists are now forecasting a 1% to 2% decline in China's GDP in 2020 with the majority of the drop confined to the first half.

"The lockdown of cities around the world and the shutdown of the aviation industry will cause a fall in demand the industry has never seen before". The rate of workers' return to work was posted at 89.9%.

Australian markets faded after the index got off to a flying start on Monday and surged by 7%.

The Securities and Exchange Board of India (Sebi) on Monday asked credit rating agencies not to classify a company as a defaulter if it misses payments of interest or principal owing to the nationwide 21-day lockdown.

Other reports by Click Lancashire

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