China PMIs rebounded on holiday distortions: study

The March rise does not signal recovery.

China’s official purchasing managers’ indices (PMI) rebounded in March, but Nomura said the improvement mainly reflected Lunar New Year distortions rather than a genuine recovery.

The official manufacturing PMI rose to 50.4 in March from 49.0 in February, whilst the official non-manufacturing PMI climbed to 50.1 from 49.5.

Nomura said the rebound came as businesses resumed operations after a longer and later-than-usual holiday in February.

The bank said markets should not read the March figures as a sign of a real economic recovery, adding that it still expects major activity indicators to weaken in the coming months.

It said the property sector remains in its sixth year of contraction, with consumption and investment still tracking below Beijing’s growth target of 4.5% to 5.0% for 2026.

Within manufacturing, Nomura said new export orders weakened to a quarterly average of 47.3 in the first quarter from 47.5 in the fourth quarter, whilst employment edged down to 48.2 from 48.3.

Large enterprises led the mild improvement, but conditions for medium-sized and small firms deteriorated.

Price pressures strengthened sharply in March, with the input price index jumping to 63.9 from 54.8 and the output price index rising to 55.4 from 50.6, both the highest since the first quarter of 2022.

Nomura said it now expects producer price inflation to turn positive at 0.4% year on year in March from minus 0.9% in February.

Nomura also raised its first-quarter GDP growth forecast to 4.5% from 4.1%, citing strong exports and better investment growth in January and February.

Still, it pushed back its forecast for a 10-basis-point policy rate cut to the fourth quarter from the second quarter after the People’s Bank of China’s latest signal.