March's manufacturing Purchasing Managers' Index (PMI) reached 50.4%, marking a 1.4 percentage point increase from the previous month and returning above the expansion-contraction threshold. The economy is transitioning from "price-driven demand suppression" to "demand recovery with intensified cost constraints." The pattern of weakening demand and widening price gaps observed in January's PMI saw a temporary correction in March, as marginal improvements in demand pushed the index back into expansion territory. However, cost pressures on corporate behavior not only persisted but intensified, shifting economic operations from "demand constraints" to "cost constraints."

Both domestic and external demand showed marginal improvement, though structural divergences remain. The new orders index and new export orders index stood at 51.6% and 49.1% respectively, rising by 3.0 and 4.1 percentage points from February. The significant rebound in new orders indicates domestic demand recovery driven by policy support and post-holiday resumption of work, while export orders, though still below the threshold, displayed weak recovery characteristics amid global oil price surges and trade disruptions. Overall, domestic demand recovery outpaced external demand, serving as the primary driver of the current economic uptick.

Production resumed expansion but faces sustainability challenges. The production index reached 51.4%, up 1.8 percentage points monthly, re-entering expansion territory. However, considering price factors, the production recovery appears more responsive to order improvements than driven by active corporate expansion intentions, with sustainability contingent on profit margin recovery.

Inventory dynamics show characteristics of "passive destocking with cautious replenishment." The finished goods inventory index rose 0.9 percentage points to 46.7%, remaining below seasonal levels, while raw material inventories edged up 0.2 percentage points to 47.7%. Demand recovery outpacing supply adjustments has triggered passive destocking, with replenishment intentions significantly constrained by cost pressures, maintaining only essential inventory restocking.

The price gap widened further, with profit pressures becoming the core constraint. The spread between raw material purchase prices and factory gate prices expanded to 8.5%, a sharp 4.3 percentage point increase from February. Upstream sectors implemented production controls and price hikes under "anti-internal competition" policies, while downstream sectors faced limited pricing power despite demand recovery, exacerbating cost-to-profit squeezes. This price increase exhibits typical cost-push characteristics rather than demand-driven dynamics.

Corporate behavior has entered a "defensive cycle." Under continuous profit margin compression, companies alternate between "precautionary procurement" and "consumptive production," managing inventory precisely to mitigate price volatility risks, manifesting as "low inventory operations with cautious replenishment." This pattern explains why inventory and production expansion remain restrained despite demand recovery.

By enterprise size, large enterprises maintained PMI above threshold at 51.6%, while medium and small enterprises registered 49.0% and 49.3% respectively, showing significant rebounds particularly among small firms. Sector-wise, the divergence between industries affected and unaffected by "anti-internal competition" policies remained largely unchanged from previous readings.

The non-manufacturing PMI rose 0.6 percentage points to 50.1%, with construction sector activity index reaching 49.3%. Project resumption rates and workforce return rates showed year-over-year improvements as of late February, with real estate projects demonstrating particular momentum in labor return rates and capital availability.