Chinese manufacturing index dims growth outlook
China’s official factory and services gauges pulled back from multi-year highs, dimming the outlook for the sustainability of the past two quarters’ acceleration in economic growth.
The manufacturing purchasing managers index fell to 51.2 in April from an almost five-year high of 51.8 in March, missing the median estimate of 51.7 in a Bloomberg survey and falling short of all projections.
Non-manufacturing PMI dropped to a six-month low of 54 from 55.1 last month. But both gauges still show momentum, as numbers higher than 50 indicate improving conditions.
The first official economic indicator for the second quarter signals the expansion may be poised to decelerate this year after unexpectedly picking up to 6.9 per cent in the first quarter, the first back-to-back acceleration in two years.
The factory and services gauges remain at relatively robust levels, but April data showed broad-based weakening across employment, output, new orders and export orders.
While analysts have upgraded their forecasts for growth this year, according to a Bloomberg survey, tighter property curbs in major cities and a higher base of producer prices than last year are likely to weigh on output in coming months.
“The weakness is across the board” and pointed to slowing growth momentum, Commerzbank economist Zhou Hao wrote in a note.
“This on one hand reflects that there is little improvement in underlying demand; on the other hand, the de-leveraging effort by the Chinese authorities, has started to work. In general, China is in the course of monetary tightening and regulation strengthening.”
Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, said the initial signs for April added to the case that China’s growth may be close to a peak for the year.
“The main driver of that: a turn in the real estate sector, with sales slowing in the first quarter. A slightly tighter monetary policy stance, as the People’s Bank of China edges rates higher and loans slow, is also a factor,” Orlik said.
Wen Bin, a researcher at China Minsheng Banking in Beijing, said manufacturing would probably stabilise at the present level or retreat slightly amid a stronger government emphasis on financial stability.