Activity levels across China’s manufacturing sector expanded for the first time in eight months in March, according to a report from China’s National Bureau of Statistics (NBS).
The government’s manufacturing purchasing managers index (PMI) rose 1.2 points to 50.2, marking the first expansion in activity levels seen since June 2015.
It beat expectations for a smaller increase to 49.3.
The PMI measures changes in activity levels from one month to the next, with 50 signifying that activity levels were unchanged from one month earlier.
The vast majority of the strength was concentrated in larger firms, offsetting persistent weakness in small and medium sized enterprises.
For larger firms the PMI jumped to 51.5 from 49.9 in February. The readings for smaller and medium sized firms came in at 49.0 and 48.1 respectively, indicating contraction.
Like the headline index, the internals of the report were also reasonable if not spectacular.
Output accelerated to 52.3 from 50.2, the fastest expansion seen since September 2015, while purchase quantities rose to 52.6 from 47.9 in February.
Encouragingly, new orders and new export orders — lead indicators for future levels of activity — bounced back into expansionary territory, rising to 51.4 and 50.2 respectively.
Elsewhere readings on employment, order backlogs and inventory levels continued to contract, registering 48.1, 45.7 and 48.2 respectively.
Mirroring the reversal in China’s manufacturing sector, activity levels across the nation’s services sector also improved, expanding at a faster pace in March.
The non-manufacturing PMI, also released by the NBS, came in at 53.8, some 1.1 points higher than February. Though modest, the expansion was the quickest seen since December last year.
Though it tends to receive far less attention than the manufacturing report, this reading is perhaps more important given the government is looking to the services sector to help power China’s economic growth moving forward.
Risk assets, particularly those closely aligned to the performance of the Chinese economy, have responded positively to the news.
The Australian dollar briefly hit .7700 while Australia’s ASX 200, having been down more than 1.7% earlier in the session, trimmed its losses to 1.1%.
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