China April factory activity expands slightly

> Official PMI comes in just above 50 mark, disappointing analysts

BEIJING: Activity in China’s manufacturing sector expanded for the second month in a row in April but only marginally, an official survey showed yesterday, raising doubts about the sustainability of a recent pickup 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, wrote in a note.

“To some extent, this hints that recent China enthusiasm has been a bit overpriced and the data improvement in March is short-lived.”

While 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 less raw materials, possibly due to recent skyrocketing 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 3 years. – Reuters