Economists had expected stronger growth in the manufacturing sector after recent stimulus measures by the Beijing regime.
China’s manufacturing sector expanded less than expected in April, raising doubts about the sustainability of a recent pick-up in the world’s second-largest economy.
The official purchasing managers’ index (PMI) was 50.1 in April, easing from March’s 50.2 and barely above the 50-point mark that separates expansion in activity from contraction.
Analysts polled by Reuters had predicted the reading would improve to 50.4, after upbeat March data fuelled hopes that the country’s prolonged economic slowdown was easing.
The findings were “a little bit disappointing”, Zhou Hao, senior emerging market economist at Commerzbank in Singapore, said.
“To some extent, this hints that recent China enthusiasm has been a bit overpriced and the data improvement in March is short-lived.”
Activity in China’s services industry remained strong but also grew
at a slightly slower pace, with the official reading at 53.5 in April,
compared with 53.8 in March.
While industrial production expanded modestly (52.2) and at nearly
the same pace as in March, growth in domestic and export orders faded
slightly, though remaining in positive territory.
In a sign of caution over the outlook, factories continued to draw down heavily on inventories of finished goods.
Factories also appeared to be stockpiling fewer raw materials,
possibly due to recent price increases for products such as steel, which
have been linked in part to a recovery in the property market.
Indeed, South Korea reported April demand from China was the worst in
three months, with exports to its biggest market tumbling 18.4% on-year.
And China’s factories continued to shed workers, with staff cuts
quickening from the previous month. The official PMI survey, which tends
to focus on larger, state firms, has shown persistent declines in
employment for the last three years.
March data had spurred hopes that the long suffering manufacturing
sector was bottoming out, with growth in industrial output and profits
That in turn had led economists to wonder if the government and
central bank would begin to take a less aggressive policy approach after
a more than one-year long blitz of fiscal, monetary and administrative
To be sure, the property recovery appears to have spurred demand for
building materials from cement and glass to steel, and a recent rebound
in commodity prices is bringing in more cashflow for some companies to
service their mountains of debt.
However, home sales are now tumbling in some big cities such as
Shanghai as authorities try to curb rapid price rises, and sizzling
steel and iron ore markets cooled last week after China’s securities
regulator ordered commodity futures exchanges to control speculative
Analysts also worry that recent signs of improvement may be largely
driven by companies and local governments taking on more debt, putting
the chances of a stable recovery at risk.
China’s five biggest banks reported last week that their bad loans
had increased by 53.2bn yuan ($8.21 billion) in the first quarter.
News Source: The Gurdian