China manufacturing PMI suffers worst decline in two years

China’ Caixin manufacturing purchasing managers’ index fell in March at its fastest pace in two years, as a resurgence in Covid cases and the conflict in Ukraine weighed.

The index declined to 48.1 from 50.4 in February, coming in below the 50 mark that separates contraction from expansion and below consensus expectations for a reading of 49.9.

The reading was in line with the official PMI released by the National Bureau of Statistics on Thursday.

Pantheon Macroeconomics said the Caixin PMI "largely confirmed the message of its official counterpart, and if anything provided a bleaker depiction of China’s manufacturing sector in March".

Economist Craig Botham said: "Factory closures were evident in plunge of output to 46.4 from 50.1, the weakest reading since the start of the pandemic. New orders also saw a precipitous decline, to 45.4 from 51.5. Export orders fell slightly less sharply, though a drop to 44.5 from 48.3 is still painful. Restrictions aimed at bringing China’s worst Covid outbreak since early 2020 are exacting a heavy toll on the economy.

"Curiously, delivery times have not returned to pandemic highs, despite worsening in March, unlike the official PMI’s measure.”

Botham said worse is likely to come for China’s PMIs.

"Not only do infections continue to rage, but Omicron has reportedly resurfaced in Shenzhen, suggesting the city may have been too hasty in relaxing its controls, and acting as a warning to other regions of China, which will now likely pursue existing stringent measures for longer."