FX Guys

Slower China factory activity growth challenges economic recovery prospects

The official manufacturing purchasing managers’ index (PMI) stood at 51.9, against 52.6 in February, according to data from the National Bureau of Statistics (NBS), above the 50-point mark that separates expansion and contraction in activity on a monthly basis.

That slightly exceeded expectations of 51.5 tipped by economists in a Reuters poll, and led to the yuan strengthening against the dollar. The February figure had grown at the fastest pace in more than a decade.

China’s economic activity picked up in the first two months of 2023 as consumption and infrastructure investment drove a recovery after the end of COVID-19 disruptions and retail sales swung back to growth.

Nomura economists said the strong data suggested China’s economy had reached a “sweet spot” after the end of property tightening measures and the zero-COVID policy.

“However, amid rapidly worsening geopolitical tensions and financial concerns outside of China, this may…
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