Explainer | China’s economic recovery maintains momentum, but risks remain: 4 takeaways from April’s manufacturing, services data
- China’s manufacturing production activity expanded in April, but analysts pointed to supply-demand imbalances and lingering deflationary pressures
- China’s official non-manufacturing PMI stood at a three-month low in April, dragged down by a moderation of services activities
1. Manufacturing recovery consolidates, but underlying issues remain
China’s official manufacturing purchasing managers’ index (PMI) remained in expansion territory for a second straight month in April, although the growth slowed slightly compared to March, with analysts pointing to underlying subindices pointing to persisting supply-demand imbalances and lingering deflationary pressures.
“On the one hand, manufacturing production activity expanded in both the [official] and Caixin readings,” said Erin Xin, an economist for Greater China at HSBC.
“On the other hand, the headline manufacturing [official] PMI moderated a touch while the Caixin manufacturing PMI accelerated, driven by improved external demand in the latter, while profit margins may be showing some signs of pressure.”
Within the official manufacturing PMI, the subindex gauging new orders dropped to 51.1 from 53 in March, while the new export order subindex fell to 50.6 from 51.3, indicating that demand has not yet been fully consolidated.
“The expansion of [the official] manufacturing PMI for a second consecutive month reveals growing confidence about the consolidation of economic momentum. In particular, export orders continue to expand, which may be a combined result of global manufacturing activities stabilisation, electronics cycle recovery and increased efforts by exporters to tap into new markets,” said Junyu Tan, regional economist for North Asia at Coface.
“But the underlying subindices still point to persisting supply-demand imbalances and lingering deflationary pressures.”
