March 29, 2018 / 4:37 AM / 5 months ago

China's manufacturing growth seen picking up slightly in March

BEIJING (Reuters) - 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 swings back into high gear.

FILE PHOTO: A worker monitors molten iron pouring into a furnace at steel manufacturing plant in Hefei, Anhui province August 15, 2012. REUTERS/Stringer/File Photo

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.

A separate survey last week by World Economics, a private economic data provider, showed a gauge of sentiment among sales managers jumped to an eight-month high in March, with growth in manufacturing sales hitting a three-year peak.

Driving the positive sentiment are better-than-expected manufacturing output and exports in the first two months of the year, particularly in tech shipments, the fastest-growing segment of China’s industrial sector.

Sino-U.S. trade relations will be key to China’s manufacturing outlook, with U.S. President Donald Trump threatening to slap tariffs on Chinese tech and telecommunications shipments to the United States.

Similarly, swelling inventories of steel could weigh on future production, following a burst of output in recent months. Steel prices have already tumbled in recent sessions as steel stocks hit multi-year highs. [IRONORE/]

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

SOLID MOMENTUM

Overall, China’s economic data so far this year suggest 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.

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 Manufacturing Purchasing Managers’ index (PMI) will be 51.7 in March versus 51.6 the previous month.

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

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

The private Caixin manufacturing PMI will be published on April 2, with the Caixin services PMI to be released on April 4.

Reporting by Stella Qiu and Ryan Woo; Polling by Shaloo Shrivastava and Wang Jing; Editing by Kim Coghill

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