China April factory growth slows to weakest in 7 months — Caixin PMI
BEIJING: China’s factory sector lost momentum in April, with growth slowing to its weakest pace in seven months as domestic and export demand faltered and commodity prices fell, a private survey showed yesterday.
The findings echoed those in official manufacturing and service sector data on Sunday, reinforcing views that China’s economic growth remains solid but is starting to moderate after a surprisingly strong start to the year.
The Caixin/Markit Manufacturing Purchasing Managers’ index ( PMI) fell to 50.3 in April, missing economist forecasts’ of 51.0 and a significant decline from March’s 51.2.
The index remained above the 50.0 mark which separates expansion from contraction on a monthly basis, but only just, and grew at its slowest pace since September 2016.
The private factory survey suggested growth faded at a shaper pace than the official reading, but economists largely attributed the softening in both cases to a pullback in global commodity prices and signs of moderating in China’s red-hot housing market after a flurry of government cooling measures.
Betty Wang, senior China economist at ANZ, said many companies had “too strong” a bullish view when global commodity prices began rallying late last year, but that trend is now changing, making firms more cautious about spending.
Coupled with more property tightening measures hitting the real estate sector – a major driver for China’s economy – since March, market expectations may have started to reverse, she add.
The private survey showed production growth and total new orders rose at the slowest pace since last September, with both showing only slight improvement from the previous month.
Sharp falls in prices of iron ore, steel and other raw materials led to a sharp cooling in producer price inflation, which has helped some firms’ such as steel mills and smelters post their strongest profits in years. The official manufacturing PMI fell less sharply but still slid to a six-month low of 51.2 in April from March’s near five-year high of 51.8, according to data at the weekend.
Analysts had expected a reading of 51.6. Growth in China’s services sector slowed to 54.0 in April, from the previous month’s 55.1, but remained robust.
China’s economy expanded 6.9 per cent in the first quarter, fueled by a construction boom.
That is likely to give it enough of a tailwind to hit Beijing’s fullyear target of around 6.5 per cent even if growth slowly fades in coming months as many analysts predict.
ANZ’s Wang said the loss of momentum in the monthly activity surveys does not portend a growing risk of a hard landing at least in the short-term, noting the government in general still remain supportive of credit conditions for the real economy despite a crackdown in certain sectors such as real estate and interbank lending. — Reuters