China’s factory activity contracts as tariffs darken trade landscape
China’s purchasing managers’ index for April comes in at 49, falling short of expectations as US tariffs begin to bite
China’s factory activity has fallen back into contractionary territory as manufacturers bear the weight of weeks of tit-for-tat tariff increases by the world’s two largest economies.
The purchasing managers’ index (PMI) hit a 16-month low of 49 for April – down from 50.5 in March and 0.6 percentage points lower than the 49.6 forecast from economists polled by Bloomberg.
A reading above 50 indicates expansion in the manufacturing sector, while one below 50 reflects contraction.
“Factors such as the rapid growth of the manufacturing sector in the earlier period, which leads to a higher base, as well as abrupt changes in the external environment had an impact,” Zhao Qinghe, senior statistician at the National Bureau of Statistics, said on Wednesday.
Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said April’s weak manufacturing PMI figure was “driven by the trade war” between China and the United States.
“I think the macro data in China and the US will weaken further in Q2, as the trade policy uncertainty delays business decisions,” he said. “It will take time for the two countries to initiate negotiation. Meanwhile the global supply chains are under pressure and may face potential disruptions.”