World Economy

A closely watched indicator of China's economy falls short of expectations

Key Points
  • Caixin, IHS Markit released China March manufacturing PMI that hit a four-month low of 51.0 in March.
  • That metric focuses on smaller businesses in China compared to the official PMI reading, which was released on Saturday.
A textile worker at a factory in Nantong city, located in the Jiangsu province, China.
VCG | Getty Images

A survey focused on small and mid-size manufacturing in China fell short of expectations for March.

The Caixin/Markit manufacturing Purchasing Managers' Index (PMI) for March came in at 51.0, hitting a four-month low.

Economists polled by Reuters expected the private Caixin/Markit PMI to edge slightly higher to 51.7 in March versus 51.6 in February.

A reading above 50 indicates expansion, while a reading below that signals contraction.

The Caixin/Markit survey focuses on small and mid-size businesses in China and comes after the world's second-largest economy reported official March manufacturing PMI on Saturday that surpassed expectations.

The official PMI released on Saturday rose to 51.5 in March, from 50.3 in February, and was well above the 50-point mark that separates growth from contraction on a monthly basis.

The slowdown in manufacturing expansion was due to weak growth in production and total new orders amid muted foreign demand, Caixin and IHS said in a joint press release with no mention of international trade tensions.

"Overall, the manufacturing PMI reading in March showed that demand was not as strong as expected, leading to lower willingness of manufacturers to produce and restock," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.

China's economy surprised on the upside in 2017, but economists expect a managed slowdown this year to hit growth. A budding trade war with the U.S. may also take its toll.

Domestically, the Chinese government is cracking down on high debt levels and heavily polluting industries while engineering a transition toward a services and consumption-led economy.

A corresponding private release of China services PMI for March is set to be released on Wednesday.