Asia Economy
China's manufacturing and services improved slightly in April
By Finfacts Team
May 5, 2014 - 10:38 PM

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China's manufacturing and services improved slightly in April with teh the final HSBC Manufacturing Purchasing Managers' Index (PMI) for April published Monday, showing a slight rise to 48.1 from 48.0 in March, but still below the key 50 level which suggests continuing contraction in manufacturing. The official manufacturing index, which was published last week and tracks more big state companies than the HSBC measure, showed that activity strengthened slightly to 50.4 in April from 50.3 in March while the official non-manufacturing PMI, which covers services, also improved slightly in April.

Production at Chinese manufacturers fell for the third consecutive month in April, though at a weaker pace than in March. Panellists generally attributed the latest reduction of output to fewer new orders, which decreased at a marked rate in April. Data suggested that sluggish domestic demand predominantly led to the fall in total new business, as new export orders declined only slightly. Weaker client demand was attributed by a number of survey respondents to deteriorating market conditions.

Goods producers in China cut their staffing levels for the sixth month running in April, amid reports of company down-sizing policies which stemmed from lower production requirements. Moreover, the rate of job shedding accelerated from the previous month. Despite reduced workforce numbers, volumes of unfinished work fell for the third successive month in April. That said, the rate of backlog depletion was marginal.

Fewer new orders led manufacturers to cut back on their purchasing activity in April. However, the pace of reduction was only slight, having eased from that seen in March. Firms also depleted their stocks of purchases at a marked rate in April, reflective of efforts to lower inventories in line with weaker client demand.

Average input costs faced by Chinese goods producers fell for the fourth consecutive month in April. Despite easing from March, the rate of reduction was solid overall. Factory gate prices also fell during April, and at a solid pace. Anecdotal evidence suggested that charges were cut to boost client demand.

Hongbin Qu, chief economist, China & Co-Head of Asian Economic Research at HSBC said: "The final reading of the HSBC China Manufacturing PMI stabilised at 48.1 in April, up slightly from 48.0 in March, and revised down from an earlier flash reading of 48.3. The latest data implied that domestic demand contracted at a slower pace, but remained sluggish. Meanwhile, both the new export orders and employment sub-indices contracted, and were revised down from the earlier flash readings.

These indicate that the manufacturing sector, and the broader economy as a whole, continues to lose momentum. Over the past few days, Beijing has introduced more reform measures which could support growth by inducing more private sector investment. We think bolder actions will be required to ensure the economy regains its momentum."

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