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BEIJING (Reuters) - China's factory activity expanded at its fastest pace in four months in March, driven by stronger demand and robust export orders, a private sector survey showed on Tuesday, although an escalating trade war with the United States weighed on the outlook.
The Caixin/S&P Global Purchasing Managers' Index (PMI) for China's manufacturing sector rose to 51.2 in March from 50.8 the previous month, beating analysts' expectations of 51.1. The 50 mark separates growth from contraction.
The recovery was in line with the official PMI released on Monday, which showed manufacturing activity grew at the fastest rate in a year.
March’s improvement was driven by an acceleration in new orders, with export orders rising at the fastest pace in 11 months. Analysts attribute the export surge in part to U.S. importers stockpiling Chinese goods ahead of expected tariff increases.
Hiring showed signs of improvement, with manufacturers adding jobs for the first time since August 2023.
"The labor market remained relatively sluggish and deflationary pressures persisted, due to insufficient effective demand at home and weak optimism among market participants," said Wang Zhe, senior economist at Caixin Insight Group.
The trade war also threatens to undermine momentum. U.S. President Donald Trump has imposed a cumulative 20% tariff on Chinese imports since January and is expected to announce additional “reciprocal” tariffs this week.
“We doubt the rest of the year will be much better. The budget allows for fiscal support to be ramped up further in the coming months. But U.S. tariffs, which are set to increase this week, will start to weigh on exports soon,” Julian Evans-Pritchard, head of China Economics, said on Monday.
Input costs fell for the first time in six months, allowing factories to cut output prices for the fourth straight month.
(Reporting by Liangping Gao and Ryan Woo)
