Manufacturing growth picks up

Economy forecast to grow by 6.9% in first half

Growth in China’s manufacturing sector likely picked up slightly in March as authorities lifted winter industrial pollution restrictions and steel mills cranked up production as construction activity swung back into high gear.

The official manufacturing Purchasing Managers’ Index (PMI) is expected to have risen to 50.5 in March, from February’s 50.3, according to a median forecast of 29 economists in a Reuters poll. The 50-mark divides expansion from contraction on a monthly basis.

That would mark the 20th straight month of expansion for China’s vast manufacturing sector, and reinforce consensus views that the world’s second-largest economy will see only a modest slowdown in growth this year.

Defying expectations of a winter lull, Chinese steel companies continued to ramp up output in the first quarter in response to strong sales, and also boosted borrowing, capital expenditure and hiring, a survey from the China Beige Book showed on Wednesday.

But steel prices have tumbled in recent sessions as inventories swelled to multi-year highs.

Overall, China’s economic data so far this year suggests the economy has carried solid growth momentum into the first quarter from last year, with a government think tank forecasting the economy will grow 6.9 percent in the first half.

That would keep global growth on track.

But economists are sticking to forecasts that China’s pace will slow later in the year, weighed down by a cooling property markets and rising borrowing costs.

A sharp escalation in trade tensions with the US has also clouded the outlook and may have started to dampen exporters’ confidence. US President Donald Trump last week imposed tariffs on steel and aluminum imports and targeted China by announcing plans for tariffs on up to $60 billion of Chinese goods.

Economists expect a private survey on China’s factory activity next week will show a similar firming trend as in the official survey, after growth in February picked up to a six-month high.

They predict the private Caixin/ Markit PMI will be 51.7 in March versus 51.6 the previous month.

The private survey tends to focus on small and medium-sized firms, which have not benefited as much from a year-long, State-led construction boom as large, governmentowned industrial heavyweights.

The official PMI survey will be published on March 31, along with a similar official survey covering the services sector.