China: Pandemic concerns weighed on PMIs in March – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest PMI figures in the Chinese economy.

Key Takeaways

“China’s official manufacturing and non-manufacturing Purchasing Manager’s Indexes (PMIs) contracted in Mar. This is the first time both were in contraction at the same time since two years ago in Feb 2020 as China battles its worst pandemic outbreak since Wuhan in early-2020.”

“The non-manufacturing PMI slumped 3.2 points to 48.4 in Mar from 51.6 in Feb, the lowest reading since Sep 2021. In comparison, the impact of the pandemic lockdowns on manufacturing activities was more contained as the PMI dropped by a smaller 0.7 point to 49.5 in Mar from 50.2 in Feb.”

“Input prices increased for both manufacturing and non-manufacturing as cost pressures rose on the back of COVID-19 disruptions and higher global commodity prices.”

“The combination of weaker production/ consumption and higher cost pressures has increased downside risks to China’s outlook this year. Our forecast for China’s GDP growth is at 4.9% this year with 1Q22 GDP likely at around 4.5% y/y (4Q21: 4.0%).”