Chinese factory activity declines in April on weak global consumption

Official figures show that China’s manufacturing activity contracted in April. This comes as global demand for commodities slows and Communist Party leaders warn that the world’s second-largest economy’s post-Covid recovery has not yet laid a solid foundation.

The National Bureau of Statistics Purchasing Managers Index fell to 49.2 points from 51.9 in March, below analyst expectations of 51.4 in a Reuters poll.

China’s non-manufacturing Purchasing Managers Index, which includes the services and construction sectors, stood at 56.4, down from 58.4 in March, but down since President Xi Jinping ended the coronavirus-free policy restricting the country’s economy in December. , still showing expansion.

A number above 50 indicates an increase compared to the previous month, and a number below 50 indicates a contraction.

Zhou Hao, chief economist at Hong Kong-based brokerage Guotai Junan International, said: “This is a mixed PMI report that shows China’s post-Covid recovery has lost some momentum and needs continued policy support. suggests that

In a sign of China’s economic recovery from last year, state media reported forecasts that about 240 million passenger trips will take place during the five-day May Day holiday this week. That’s more than his 2019 pre-pandemic.

But while consumer activity is recovering from low levels, the rest of the economy faces more serious challenges, with the real estate sector still sluggish after government crackdowns and advanced economies slowing down. Export markets are declining as they weaken.

China’s March PMI showed a similar picture, with manufacturing growth slowing despite a rebound in exports, while activity in other sectors picked up sharply and showed an uneven recovery.

“Economic growth has exceeded expectations… China’s economy is off to a good start,” the Communist Party’s Politburo said at a meeting on Friday. But the “endogenous dynamics” of the economy “still remain weak and demand is insufficient,” state media Xinhua reported, citing the bureau.

Zhao Qinghe, senior statistician at the NBS, said in a statement on Sunday that the contraction in the manufacturing PMI was “due to insufficient market demand and a high base created by the rapid recovery in the manufacturing sector in the first quarter. It depends on the factors,” he said.

Production expanded slightly, but the sub-indexes for manufacturing new orders, raw material inventories and employment all fell.

Goldman Sachs said in a note that the performance of the non-manufacturing index “remained strong, but below market expectations, suggesting an ongoing recovery in construction and services, but the pace since. is late,” he said.

The recovery in construction was partly driven by infrastructure, according to NBS. Beijing has used its infrastructure to stimulate growth following the collapse of its property sector over the past two years.

The Politburo signaled more support for the economic recovery and called for targeted “aggressive fiscal policy” and “prudent monetary policy.”

“The income of urban and rural residents should be increased through multiple channels . reported as.

Nomura expects China’s export industry to continue to come under pressure from “the ongoing global technology recession, heightened turmoil in global financial markets, and deteriorating US-China trade relations.”

“Weak exports are likely to continue to hamper the recovery in employment and manufacturing investment,” said a report ahead of the release of PMI data.