BEIJING, April 1 (Reuters) - The Chinese manufacturing sector took a fresh turn for the worse in March, after three months of tentative improvement, a survey by brokerage CLSA showed on Wednesday.
CLSA's Purchasing Managers' Index (PMI) dipped to a seasonally adjusted 44.8 in March from 45.1 in February, dragged down by a drop in new domestic orders.
It is the eighth month in a row that the index, designed to provide a timely snapshot of manufacturing conditions, has been below the watershed of 50. A reading above 50 indicates expansion, while a figure below 50 indicates contraction.
Eric Fishwick, head of economic research at CLSA, said the PMI showed the danger of increasing orders in anticipation of the government's 4 trillion yuan ($585 billion) stimulus package rather than waiting for projects to be actually rolled out.
"A worsening of domestic manufacturing orders lies behind the drop in the PMI and accords with what we are seeing on the ground in the steel industry," Fishwick said in a statement.
Accordingly, he said the PMI's production index, which was a bit stronger in March, was likely to show softness in April.
More encouragingly, Fishwick noted that export orders improved further last month; they still fell, but at the most moderate pace since October.
The PMI is derived from a survey of more than 400 manufacturers conducted for CLSA by Markit Economics.
The government's official PMI for March is due to be released on Saturday.
Following is a breakdown of CLSA's PMI (seasonally adjusted):
Mar Feb Jan Dec Nov Oct Sep Overall PMI 44.8 45.1 42.2 41.2 40.9 45.2 47.7 Output 44.3 43.9 39.7 38.6 39.2 43.4 46.7 New orders 43.6 44.2 39.9 37.0 36.1 43.8 45.8 Employment 47.1 46.6 45.0 45.2 46.0 48.2 49.4 Supply delivery times 53.8 51.6 51.7 52.0 53.9 51.2 48.4 Stocks of purchases 43.2 42.8 40.2 41.6 42.1 42.8 46.9
Following is a breakdown of another six sub-indexes that are not components of the PMI (seasonally adjusted):
Mar Feb Jan Dec Nov Oct Sep Input prices 36.2 43.7 31.8 21.2 17.3 35.9 51.2 Quantity of purchases 43.2 40.3 36.8 37.1 37.3 42.8 47.8 Finished goods stocks 47.2 45.3 44.7 48.5 50.2 49.3 51.6 New export orders 41.4 39.5 36.3 33.6 28.2 44.3 45.9 Output prices 41.3 45.6 42.8 33.3 32.2 39.9 48.4 Backlogs of work 49.4 49.5 46.9 42.7 44.2 49.4 49.5
Markit Economics also highlighted the following findings from its survey:
-- Firms cited frail demand and the fallout from the global economic crisis as reasons for the latest marked cuts in output. The global downturn is also prompting clients to postpone projects, depressing new orders.
-- Stocks of finished goods contracted for the fourth straight month, although less sharply, due to "challenging operating conditions" that prompted firms to fill orders out of existing inventories instead of raising production.
-- Panellists continued to shed labour due to the weak demand outlook, but they did so at the slowest rate since October.
-- Firms scaled back their input buying, reflecting falling output and a drive to streamline inventories. But the drop in purchasing was the slowest for six months.
-- Stocks of pre-production goods declined for the twentieth month in a row. Almost a quarter of respondents said stocks were lower than a month earlier in anticipation of weaker demand. (Reporting by Alan Wheatley; Editing by Jonathan Hopfner)