TrendForce

2025-04-21

Key Focus This Week: US Home Sales & Euro Zone PMI

Last week, the Trump administration launched Section 232 investigations into semiconductors and pharmaceuticals, while also tightening restrictions on Nvidia’s chip exports to China, heightening market fears of renewed U.S.-China trade tensions. At the same time, Federal Reserve Chair Jerome Powell emphasized the need to confirm that the inflationary impact of tariff policies is transitory, reiterating that any future policy adjustments would remain data-dependent. He also stated that the idea of a "Fed Put" has never been part of the Fed’s thinking. Weighed down by these dual headwinds, the S&P 500 declined 1.5% for the week, closing at 5,282.69. In the bond market, the U.S. 10-year Treasury yield retreated to around 4.3%, while the U.S. dollar remained under pressure amid rising concerns over U.S. creditworthiness. The dollar index dropped below the 100 mark for the first time since 2022, closing at 99.404. Key Economic Data Last Week China GDP: China’s Q1 2025 GDP grew by 5.4% YoY (prior: 5.4%), beating market expectations. On a monthly data, March retail sales grew 5.9% YoY (prior: 4.0%), with year-to-date growth reaching 4.6% (full-year 2024: 3.5%), driven by strong sales of automobiles and home appliances supported by a doubling of consumption subsidies. Exports surged 12.4% YoY (prior: 2.3%), likely reflecting front-loaded shipments ahead of further deterioration in U.S.-China trade relations. Fixed asset investment (FAI) rose 4.2% YTD YoY in March, supported by equipment and high-tech manufacturing investment. This also contributed to a 7.7% increase in industrial output (prior: 5.9%). However, property development investment remained weak, declining 9.9% YTD, weighing on overall investment growth. Takeaway: China's Q1 growth remained robust, supported by fiscal stimulus and front-loaded exports. However, with reciprocal tariffs between China and the U.S. reaching 125% and 245% respectively, future export momentum may suffer. Whether consumer demand can sustain recovery beyond durable goods, and if the housing market will rebound, remain key uncertainties for continued growth. Read More at Datatrack US Retail Sales: Retail sales rose 4.6% YoY (prior: 3.5%) and 1.4% MoM (prior: 0.2%) in March. Core retail sales were up 4.5% YoY (prior: 4.2%) and 0.8% MoM (prior: 0.8%), while control group retail sales increased 4.6% YoY (prior: 5.1%) and 0.4% MoM (prior: 1.3%). Auto, building materials, and electronics led the rebound, reflecting both pre-tariff front-loading behavior and potential passthrough of higher tariffs on Chinese imports that inflated final sales values. Takeaway: The jump in March retail sales was largely driven by preemptive buying due to tariff fears. Although the 90-day tariff delay temporarily eased concerns, the uncertainty remains. Front-loaded demand and elevated sales may continue into Q2, though a potential demand pullback in H2 should not be overlooked. Read More at Datatrack Japan CPI: The headline CPI rose 3.6% YoY (prior: 3.7%) in March. Core CPI (ex-fresh food) was 3.2% (prior: 3.0%), and core-core CPI (excluding fresh food and energy) came in at 2.9% (prior: 2.6%). The moderation was mainly due to falling fresh food and energy prices. However, prices of non-perishable food items continued to rise, with rice prices jumping to 92.1% YoY—the highest increase since 1971. Energy prices fell due to subsidies but with the program ending in March and all major power companies planning price hikes in April, household cost burdens are expected to rise. Meanwhile, services inflation—closely monitored by the BoJ—continued to climb, supported by wage pressures from labor shortages. Early results from the spring wage negotiations (shunto) showed gains comparable to last year’s strong increases, offering potential for further wage acceleration. Overall, Inflation remains above the BoJ’s target, and wage growth is gaining traction. These support the BoJ’s path toward policy normalization. However, the economic outlook is clouded by the U.S.’s aggressive reciprocal and auto tariffs, prompting markets to push back expectations for the next rate hike to the second half of the year. Read More at Datatrack Key Economic Data This Week US Home Sales: Tariff-related uncertainty continues to weigh on housing sentiment and developer activity. Nevertheless, with the spring selling season approaching and mortgage rates easing in March, existing home sales are expected to ease slightly to an annualized 4.14 million units (prior: 4.26 million), while new home sales are forecast at 681,000 (prior: 676,000). Read More at Datatrack Euro Area PMI: Despite the 20% reciprocal tariffs being temporarily suspended, the 25% auto tariff implemented on April 3 could still exert economic pressure. However, given seven consecutive ECB rate cuts, the eurozone composite PMI is expected to remain in expansionary territory at 50.3 (prior: 50.9). Read More at Datatrack Japan Tokyo CPI: With energy subsidies ending in March and strong wage growth likely to push up services inflation, Tokyo’s April CPI is expected to accelerate to 3.3% (prior: 2.9%). Read More at Datatrack

By TrendForce

2025-04-18

Japan March CPI: Rice Prices Hit 50-Year High, but BoJ Rate Hike Likely Delayed to July

The CPI rising 3.6% year-on-year (prior: 3.7%), marking the second consecutive monthly decline, according to Japan's Ministry of Internal Affairs and Communications on April 18. Core CPI, which excludes fresh food, rose 3.2% (prior: 3.0%), staying above the Bank of Japan’s (BoJ) 2% target for the 36th straight month. The core-core CPI, which further excludes energy, climbed to 2.9% (prior: 2.6%). The overall deceleration mainly reflected declines in fresh food and energy prices. The year-on-year gain in fresh food prices fell sharply to 13.9% (prior: 18.8%), indicating a retreat in previously surging vegetable and fruit prices. However, the food less fresh food inflation accelerated to 6.2% (prior: 5.6%), led by a surge in rice prices, which soared 92.1% (prior: 80.9%)—the highest increase since 1971. Energy prices continued to decline to 6.6% (prior: 6.9%), helped by government subsidy programs. However, as these subsidies expired in March and all 10 major power companies in Japan are scheduled to raise electricity rates in April , Japanese households are likely to face renewed cost pressures going forward. On a positive note, the BoJ’s closely watched services price index rose 1.4% YoY (prior: 1.3%), suggesting wage pressures are intensifying amid labor shortages and elevated price levels. The shunto wage negotiations are expected to further accelerate this momentum. According to the latest wage data from the Ministry of Health, Labour and Welfare, nominal wages rose 3.0% YoY in February (prior: 1.8%), marking the fastest pace in 32 years. However, real wages remained negative at -1.2% (prior: -2.8%) due to persistent inflation, while real household consumption also slipped to -0.5% (prior: 0.8%). Overall, the March inflation data came in largely in line with BoJ expectations, and rising wages continue to support its gradual policy normalization path. However, uncertainty has risen due to the U.S. government’s unexpectedly aggressive reciprocal tariff policies and the implementation of auto tariffs in early April, both of which cloud Japan’s export and economic outlook. As a result, markets are now pushing back expectations for the BoJ’s next rate hike to around July. Read More at Datatrack

By TrendForce

2025-04-17

U.S. March Retail Sales Surge on Preemptive Buying Ahead of Tariff Implementation

US retail sales rose 4.6% year-over-year in March (prior: 3.5%), while monthly sales jumped by 1.4% (prior: 0.2%), according to U.S. Census Bureau on April 16. Across the 13 major retail categories, 11 posted gains, with growth mainly driven by sales of automobiles, building materials, and electronics. Auto-related sales surged 8.8% YoY (prior: 2.3%) and 5.3% MoM (prior: -1.6%), reflecting both dealer and consumer front-loading activity ahead of the end-March auto tariff announced. Sales of building and garden materials (+3.3% MoM), sporting goods (+2.4%), and electronics (+0.8%) also accelerated noticeably. This trend partly reflects continued preemptive purchases by firms and consumers in anticipation of potential tariff shocks. Additionally, as retail sales are not inflation-adjusted, part of the increase in nominal sales likely reflects price markups—particularly on Chinese imports that were subject to tariffs and subsequently passed on to final retail prices, rather than real volume gains. Food services and drinking places—often used as a proxy for household financial health—recorded YoY growth of 4.8% (prior: 2.7%) and MoM growth of 1.8% (prior: -0.8%), the fastest pace since 2023. This reflects not only a rebound in outdoor activity amid warmer weather, but also suggests that consumers remain willing to allocate discretionary income toward services spending, even amid falling confidence and equity market volatility. Excluding autos and gasoline, core retail sales rose 4.5% YoY (prior: 4.2%) and 0.8% MoM (prior: 0.8%). After further excluding food services and building materials, control group retail sales grew 4.6% YoY (prior: 5.1%) and 0.4% MoM (prior: 1.3%), indicating that underlying consumption remains moderate. Overall, the sharp rise in March retail sales was largely driven by tariff-induced front-loading. While reciprocal tariffs have been temporarily suspended for 90 days, uncertainty remains, and such preemptive restocking and elevated sales growth may persist into Q2. However, a slowdown could follow in the second half of the year as demand is pulled forward. Following the data release, markets shifted expectations for the first rate cut to June, pricing in a total of 100 basis points of cuts for the year. However, Fed Chair Jerome Powell, in a speech delivered yesterday, cautioned that tariff pass-through to consumer prices takes time and emphasized the need for further observation to ensure that tariff effects on inflation are transitory and that long-term inflation expectations remain anchored. He reiterated that the Fed prefers to wait for more data before considering any policy adjustments, particularly given the currently favorable economic environment. Read More at Datatrack

By TrendForce

2025-04-14

Key Focus This Week: US Retail Sales & China GDP

Last week, the Trump administration announced a 90-day suspension of the reciprocal tariff policy, implementing only an increase in tariffs on Chinese imports to 125%. In response, China raised tariffs on U.S. imports to the same 125% rate and stated that it would ignore any further U.S. tariff hikes. As market fears eased, previously heavily sold stocks rebounded, lifting the S&P 500 by 5.70% to 5,363.36. In the bond market, a sharp deterioration in U.S. credit outlook, coupled with forced unwinding of basis trades and deleveraging by hedge funds, pushed the U.S. 10-year Treasury yield up nearly 50 bps to around 4.5%. Meanwhile, the U.S. dollar index fell below the 100 mark, closing at 99.783, driven by the appreciation of safe-haven currencies such as the Japanese yen. Key Economic Data Last Week US CPI: The CPI rose 2.4% YoY (prior: 3.0%) and declined 0.1% MoM (prior: +0.2%) in March. Core CPI rose 2.8% YoY (prior: 3.1%) and 0.1% MoM (prior: +0.2%), both below expectations and marking the first time since Spring 2021 that core inflation fell below 3%. The decline in energy, recreation, airfares, and auto insurance prices contributed significantly to the cooling inflation. Additionally, shelter prices—the largest component of core inflation—hit their lowest YoY growth since November 2021, signaling a continued unwinding of inflationary pressure. Although the 25% tariffs on steel and aluminum and the 20% tariff on Chinese goods were implemented in March, the weaker-than-expected inflation figures suggest these tariffs have not yet been passed on to consumer prices. This could reflect weakening consumer spending due to deteriorating confidence about the future. With both China and the U.S. having raised tariffs on each other to as high as 125% and 145% respectively, and the U.S. also applying an additional 10% global tariff, there is a risk that firms may pass rising input costs onto consumers. This would likely reignite core goods inflation and further suppress spending momentum. Read more at Datatrack China CPI: The CPI decline 0.1% YoY (prior: -0.7%) in march, marking the second straight month of deflation, and decline 0.4% MoM (prior: -0.4%). Core CPI YoY was 0.0% (prior: -0.2%), and MoM increased 0.5% (prior: -0.2%). Food prices declined -1.4% MoM, accounting for about 60% of the overall monthly drop, reflecting improved supply of fresh produce as weather conditions normalized. Consumer goods prices rose to -0.4% MoM (prior: -0.9%) due to consumption-stimulus policies such as appliance trade-in programs. However, the underlying trend remained weak. Service prices also showed similar patterns, rising 0.4% MoM (prior: -0.3%), though non-essential service categories like airfares and travel continued to decline, dropping 11.5% and 5.9% respectively. Overall, the rebound in CPI largely reflects the fading of Lunar New Year calendar effects. Although there are signs of a rebound in core inflation, PPI has now contracted for 30 consecutive months. With persistent property sector weakness and rising trade tensions with the U.S., China is under increasing pressure to further ease policy and provide stimulus. Read more at Datatrack FOMC Minutes: Fed officials acknowledged that while shelter-related inflation is easing, core goods prices may be heating up again due to tariff expectations, with some suggesting this trend could be persistent. Regional contacts reported rising input costs, with firms preparing to pass these on to consumers. On the labor market, officials generally viewed conditions as balanced. However, federal spending cuts have begun to impact government contractors, universities, and healthcare providers, with some firms reporting layoffs or hiring freezes. The Fed emphasized that policy uncertainty from tariffs and fiscal changes is heightening downside risks to both employment and economic growth, while inflation risks are also rising. Key Economic Data This Week China Q1 GDP: Boosted by front-loaded exports amid intensifying trade tensions and enhanced stimulus (notably, the appliance trade-in program), Q1 GDP is expected to rise 5.2% YoY. However, the sustainability of this momentum remains uncertain. Read more at Datatrack US March Retail Sales: Despite weakening consumer sentiment due to volatile tariff policies and a sharp equity market correction, robust job gains and pre-tariff durable goods purchases in late March are expected to lift MoM retail sales by 1.4% (prior: +0.2%). Read more at Datatrack ECB Rate Decision: Despite signaling the end of its rate-cutting cycle in the last meeting, the ECB is still expected to cut the deposit facility rate by 25 bps to 2.25%, given persistent recession risks and continued 25% tariffs on steel, aluminum, and autos—even after the U.S. suspended reciprocal tariffs for 90 days. Read more at Datatrack

By TrendForce

2025-04-11

US Core CPI Below 3% for First Time Since 2021, but Consumption Weakens Further

U.S. consumer price index (CPI) rose 2.4% year over year in March (prior: 3.0%), marking the second consecutive monthly decline, according to U.S. Bureau of Labor Statistics on April 11.On a monthly basis, CPI decreased by 0.1% (prior: +0.2%). Core CPI rose 2.8% YoY (prior: 3.1%), falling below 3% for the first time since spring 2021. Monthly core CPI was up 0.1% (prior: 0.2%). All figures came in below market expectations. Key contributors to the CPI slowdown include: Energy prices dropped further by -2.4% MoM (prior: +0.2%), with fuel oil and gasoline prices declining sharply to -6.1% (prior: +0.8%) and -6.3% (prior: -0.9%), respectively, reflecting continued weakness in global crude oil prices. Core goods inflation slipped to -0.1% MoM (prior: +0.2%). Used car prices fell -0.7% (prior: +0.9%), while recreation and medical product prices also eased to +0.1% (prior: +0.8%) and -0.7% (prior: +0.3%), respectively—major drags on core goods inflation. Core services inflation moderated to +0.2% MoM (prior: +0.3%). The largest component, shelter, slowed to +0.2% (prior: +0.3%). Additionally, auto insurance and airfares declined to -0.3% (prior: +0.3%) and -5.3% (prior: -4.0%), respectively, further pulling down overall services inflation. Overall, the notable declines in energy, recreation, airfares, and auto insurance prices significantly contributed to the easing of overall inflation. Meanwhile, shelter—by far the largest component of core inflation—continued to decelerate, with its annual growth rate falling further to 4.0%, the lowest level since November 2021 (Rent and owners’ equivalent rent rose 4.0% and 4.4% year over year, respectively.), underscoring the continued unwinding of the primary driver of core inflation. Although the U.S. implemented 25% tariffs on steel and aluminum and 20% tariffs on China in March, the downward trend in inflation suggests that the impact of tariffs has not yet filtered through to consumer prices. This likely reflects weakening consumer purchasing power. Due to elevated policy uncertainty, consumer confidence in both current and future conditions has deteriorated, reducing demand. As a result, businesses may be absorbing higher costs themselves to preserve price competitiveness. High-frequency Truflation data show inflation remains subdued at around 1.3% YoY, while further declines in recreation and airfare prices support the view that discretionary spending is weakening. With the U.S. and China imposing respective tariffs of up to 84% and 125% in April—and the U.S. imposing an additional 10% on all global imports—should companies begin passing on costs to consumers, core goods inflation could reaccelerate and further erode consumption. Following the CPI release, market participants largely expect the Fed to maintain its wait-and-see stance, with the first rate cut still projected around June. However, given signs of slowing consumption and tightening financial conditions, markets have now priced in a total of 100 bps in rate cuts for the year. Read more at Datatrack

By TrendForce

2025-04-10

Fed FOMC Minutes: Tariffs Add to Economic Uncertainty

The Federal Reserve released the minutes of its March FOMC meeting on April 10. Key highlights are as follows: Inflation Outlook Further Obscured by Tariff Policy The March FOMC meeting minutes indicated that while housing-related prices are moderating, non-housing core components remain elevated, and core goods prices have rebounded—potentially reflecting expectations that tariffs will drive up costs. Most officials believe that price fluctuations this year will be increasingly driven by tariffs. Some regional contacts have already reported rising input costs and are preparing to pass those costs on to consumers. However, some officials noted that excess household savings have been depleted, and immigration constraints could dampen rental demand—both factors that could cap inflation. Overall, distinguishing between a structural price adjustment and a temporary tariff shock is becoming increasingly difficult. Moreover, the inflationary impact of tariffs could prove persistent, depending on the extent of tariffs on intermediate goods, the complexity of supply chain restructuring, the intensity of trade partner retaliation, and the degree to which long-term inflation expectations remain anchored. Labor Market Remains Balanced, but Uncertainty Weighs on Outlook On the labor front, officials generally viewed the labor market as balanced, with unemployment staying low and wage growth moderating but remaining solid. However, federal spending cuts have begun to impact government contractors, universities, and healthcare institutions. Some firms reliant on public sector partnerships have reported layoffs or hiring freezes. In addition, rising uncertainty stemming from tariffs and other policy variables has weighed on both household and business confidence, which could further suppress consumption and investment. The minutes highlighted that downside risks to both labor markets and economic growth are growing, alongside increasing upside risks to inflation. Divergence Within the Fed on Slowing Balance Sheet Reduction SOMA managers reported that due to the debt ceiling impasse, the Treasury General Account (TGA) has declined, while reserve balances and the Overnight Reverse Repo (ON RRP) facility have rebounded. Excluding the debt ceiling issue, ON RRP usage has essentially been exhausted. If the debt ceiling is resolved, replenishing the TGA could rapidly deplete reserves, and markets may not be able to signal these changes in advance. Therefore, slowing the pace of balance sheet reduction (QT) was seen as an appropriate and effective strategy. While all officials agreed that continuing QT is directionally correct, a majority supported slowing its pace. However, some members argued that existing tools are sufficient to handle liquidity volatility, and that there is insufficient justification for pausing QT. Summary The minutes underscored that heightened uncertainty surrounding tariff policy has intensified downside risks to the economic outlook, while the inflationary effects of tariffs could be persistent—making the future trajectory of inflation increasingly difficult to predict. Although the Trump administration has delayed most reciprocal tariffs for 90 days, tariffs on Chinese imports have been raised to 125%, and 25% duties are still being imposed on steel, aluminum, and automobiles, while a 10% tariff remains in place for all countries. As a result, the effective tariff rate is projected to rise by approximately 20 percentage points, posing continued upside risks to inflation. Consequently, the Federal Reserve is likely to maintain a cautious stance and adopt a gradual approach to adjusting interest rates.

By TrendForce

2025-04-07

Key Focus This Week: US CPI & FOMC Meeting Minutes

The reciprocal tariff proposal announced by the White House last week far exceeded market expectations, imposing tariffs of 10% to 49% on trade deficit countries. This triggered market concerns that such policies would amplify inflationary pressures and drag down economic growth, potentially even raising the risk of a recession akin to the 1930s. However, Federal Reserve Chair Jerome Powell stated that it was still premature to cut rates. Amid rising panic, the S&P 500 plunged 9.08% for the week to 5,074.09. In the bond market, fears of a significant economic downturn and continued pressure from the Trump administration on the Fed to cut rates drove the U.S. 10-year Treasury yield down by 25 bps to around 4%. The U.S. Dollar Index also fell to approximately 102.9. Key Economic Data Last Week US ISM PMI: The March ISM Manufacturing PMI fell to 49.0, marking the first contraction this year. New orders, production, and employment subindices all weakened, and the new orders minus customer inventories metric turned negative, signaling that tariff uncertainty is weighing on both demand and investment. In contrast, firms frontloaded purchases to hedge against potential tariffs, pushing both inventories and supplier delivery times into expansion territory. The prices paid index surged for a sixth straight month to 69.4, the highest since June 2022, with some respondents reporting rising costs had eroded both orders and profit margins. The Services PMI also slipped from 53.5 to 50.8, with the employment sub-index plunging to 46.2, reflecting increasing caution in hiring. Read more at Datatrack US Employment Situation: Nonfarm payrolls in March increased by 228,000 (prior: 117,000), driven primarily by strong gains in services employment, particularly in retail (+23,000), leisure & hospitality (+43,000), and healthcare (+77,000). From the household survey, the unemployment rate edged up to 4.2% (prior: 4.1%), while the labor force participation rate ticked up to 62.5% (prior: 62.4%), indicating an overall resilient labor market. Nonetheless, the 3-month average of nonfarm payrolls has slowed to 152,000, signaling a continued trend of cooling momentum. Read more at Datatrack Key Economic Data This Week US Mar CPI: As temporary disruptions from January fade and a low Q1 base effect provides support, the Atlanta Fed forecasts the March CPI year-over-year rate will decline further to 2.48% (prior: 2.82%), with core CPI falling to 2.99% (prior: 3.11%). However, the recent implementation of steel and aluminum tariffs could contribute to a pickup in the March PPI. Read more at Datatrack FOMC Meeting Minutes: In its March meeting, the Fed held rates steady at 4.25%–4.50% as expected, while slowing the pace of balance sheet reduction to $40 billion per month. The Summary of Economic Projections reflected downward revisions to growth and upward revisions to inflation. The upcoming minutes will be closely scrutinized for the Fed’s assessment of tariff risks, inflation outlook, and views on the slowdown in quantitative tightening. China Mar CPI: Due to the timing shift of the Lunar New Year holiday, China’s February CPI returned to negative territory for the first time in a year. With that short-term base effect now behind us, markets expect China’s March CPI to rebound modestly to +0.1% year-over-year (prior: -0.7%). Read more at Datatrack

By TrendForce

2025-04-02

US Mar ISM Manufacturing PMI: Tariff Uncertainty Continues to Weigh on Demand as Price Pressures Reignite

The U.S. manufacturing PMI declined to 49.0 in March (prior: 50.3), marking its first contractionary reading this year, according to Institute for Supply Management (ISM) on April 1. Breaking down the components, the new orders index contracted further to 45.2 (prior: 48.6), its lowest level since May 2023, dragging the new orders minus customer inventories metric into negative territory at -1.6 (prior: 3.3). Production also shifted from expansion to contraction at 48.3 (prior: 50.7), while the employment index fell to 44.7 (prior: 47.6). The report noted that heightened uncertainty around tariff policy continued to dampen demand and reduce corporate investment appetite. Moreover, ongoing discussion between manufacturers and customers over how to absorb tariff-related costs, all these factors has further weakened new orders, production, and hiring activity. Only the inventories index and supplier delivery times remained in expansionary territory, reaching 53.4 (prior: 49.9) and 53.5 (prior: 54.5) respectively. Meanwhile, the imports index remained in expansion at 50.1 (prior: 52.6), indicating that manufacturers continue to front-load orders in anticipation of potential tariff impacts—leading to inventory buildup and longer lead times. Elsewhere, the prices index surged again to 69.4 (prior: 62.4), its sixth consecutive monthly increase and the highest level since June 2022. The proportion of firms reporting higher prices rose to 46.0% (prior: 31.4%), compared to just 12.2% in November. All 15 surveyed industries reported rising input costs, with some noting that upward pressure on prices had already led to a drop in orders. Overall, rising tariff uncertainty and escalating price pressures have significantly eroded both business and consumer confidence. At the same time, unresolved questions over how tariffs will be absorbed between producers and buyers have further suppressed demand for new orders, production, and hiring, while precautionary inventory accumulation continues to elevate stock levels. Following the data release, the Atlanta Fed’s GDPNow model revised its estimate for Q1 annualized GDP growth downward from -2.8% to -3.7%, heightening market concerns about a potential recession. As a result, expectations for rate cuts intensified, and the U.S. 10-year Treasury yield fell further to around 4.16%. Read more at Datatrack

By TrendForce

2025-03-31

China Manufacturing PMI Expands for Second Consecutive Month, but Domestic Demand Still Weak

The official manufacturing Purchasing Managers' Index (PMI) rose to 50.5 in March (prior: 50.2), marking the second consecutive monthly increase and the highest level since March 2023, according to National Bureau of Statistics of China on March 28. Within the sub-indexes, new orders climbed to 51.8 (prior: 51.1) and production edged up to 52.6 (prior: 52.5), both registering gains for a second straight month. However, labor market conditions remained subdued, with the employment index stuck in contraction at 48.2 (prior: 48.6). On the inventory front, raw material inventories slightly increased to 47.2 (prior: 47.0), remaining at low levels, while finished goods inventories declined marginally to 48.0 (prior: 48.3), pushing the gap between new orders and client inventories to 3.8 (prior: 2.8). Among other components, new export orders rose to 49.0 (prior: 48.6), the highest since May 2023. In contrast, imports dropped sharply to 47.5 (prior: 49.5), while backlogs of work fell further to 45.6 (prior: 46.0), indicating that production and sales may still be heavily reliant on external demand, with domestic demand showing limited improvement. By sector, equipment manufacturing and high-tech manufacturing continued to expand under government policy support, rising to 52.0 (prior: 50.8) and 52.3 (prior: 50.9), respectively. In contrast, consumer goods manufacturing activity edged up only slightly to 50.0 (prior: 49.9), further highlighting the lack of significant domestic demand recovery. Overall, the improvement in March PMI was driven primarily by strength in high-tech and equipment manufacturing, along with resilient export demand. However, the drag from the real estate downturn on household balance sheets remains unresolved, and private consumption momentum is still weak. Although the Chinese government continues to stimulate domestic consumption through policies such as “trade-in” subsidies, this approach—primarily targeting durable goods—may struggle to sustain long-term momentum. Meanwhile, escalating U.S. tariff threats and the rising tide of global trade barriers present additional challenges, leaving China with the critical task of how to pivot toward domestic demand as a more sustainable engine of long-term growth. Read more at Datatrack

By TrendForce