March official factory PMI: activity seen contracting at
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[March 29, 2016]
SHANGHAI (Reuters) - Activity in
China's manufacturing sector likely shrank for an eight straight month
in March, but at a slower pace than in February as a reviving property
market gave a much-needed boost to sales of steel and other construction
materials, economists polled by Reuters said.
The official manufacturing Purchasing Managers' Index (PMI) is
expected to rise to 49.3 in March from 49.0 a month earlier,
according to a median forecast of 32 economists in a Reuters poll.
February's reading was the weakest since November 2011.
Although the forecast rise implies a slower rate of shrinkage, it is
still below the 50.0 mark which separates expansion from
China's factory sector has been in an prolonged slowdown, weighed
down by weak global demand for the country's exports and
overcapacity in key sectors such steel and basic materials.
Dongbei Special Steel Group Co Ltd, an unlisted steel manufacturer
in northeast China, became the latest casualty of the supply glut
and weak demand this week. It missed a payment on an 800 million
yuan ($123 million) short-term note which matured over the weekend,
the Shanghai Clearing House said in a statement on its website on
Nonetheless, signs of a nascent turnaround in the construction
sector, driven by strong home sales and bubbly prices in big cities
such as Beijing, have recently given some support to steel and other
embattled heavy industries.
The National Bureau of Statistics' (NBS) industrial survey for
January and February showed industrial profits growing 4.8 percent
from a year earlier, reversing seven straight months of decline.
While an NBS official said that the return to growth was partly due
to a low base in the same period last year, analysts said that the
real estate recovery was also a factor.
"The recovery in property investment has helped industrial profits
return to positive growth," Zhang Wenlang, an analyst at CITIC
Securities, wrote in a note.
"Looking forward, industrial profits are likely to grow this year
thanks to improved household consumption, a recovery in property
investment and a halt in the slump in commodity prices."
Some analysts also thought an easing of concerns over capital
outflows and the direction of China's foreign exchange policy might
also have played a role in reviving business confidence.
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"We think some of the January-February strength (in profits) was due
to the release of pent-up demand from the second half of last year,"
Tim Condon, chief Asia economist at ING Bank in Singapore, said in a
"We believe steadier (central bank) policy since the second week of
January released the pent-up demand."
China's yuan currency fluctuated sharply against the dollar in
December and January amid rising concerns about capital outflows,
but it has been relatively stable since the end of the Lunar New
Year holiday in mid-February, thanks to heavy intervention by the
central bank and the dollar's loss of upward momentum.
The official manufacturing PMI data will be released on April 1,
along with the official services PMI.
The Markit/Caixin factory PMI, a private and separate gauge of
manufacturing data, will also be released on April 1.
(Reporting By Nathaniel Taplin; Editing by Kim Coghill)
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