The first official gauge of China
BEIJING: The first official gauge of China’s manufacturing sector fell in April, signaling that the economic stabilisation seen in the first quarter remains fragile.
The manufacturing purchasing managers index stood at 50.1, down from 50.5 last month, according to the National Statistics Bureau. The non-manufacturing PMI, which is a gauge of services and construction, stood at 54.3 versus 54.8.
The data may allay some concerns about China but there is still uncertainty about what will happen with the world’s second-largest economy.
While growth was stronger-than-expected in the first quarter, there is no clear sign of what a trade deal with the U.S. will look like and falling imports are both undercutting the regional economy and indicate weak domestic demand.
”Today’s PMI data suggest the strong pace of March activity is unlikely to continue,” said Michelle Lam, a greater China economist at Societe Generale SA in Hong Kong.
“Nevertheless, activity has at least gained more traction compared to the turn of the year. The feed-through of tax cuts should put the economy on a stable footing going forward.”
Asian stocks retreated with U.S. futures Tuesday amid the disappointing reading. The Australian dollar, a proxy for bets on China’s economy, ticked lower after the data.
New orders softened to 51.4 from 51.6, while new export orders recovered to 49.2, still in contraction but much higher than in the first three months of 2019.
A different PMI from Markit Economics showed a similar trend, with the factory gauge dropping to 50.2 from 50.9.
Economists had expected the the data to be basically unchanged from March, when the factory gauge rebounded over the reading of 50 and back into expansion territory. That comes after a stronger-than-expected first quarter, with gross domestic product expanding 6.4 percent and industrial output jumping 8.5 percent.
Some economists were less concerned about the data.
“With a strong first quarter GDP, growth doesn’t seem to be a big concern,” and a number above 50 is already a good start for the second quarter, said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “New export orders is a sliver lining.”
What our economists say:
The data “should be taken as broadly positive given the sharp upswing in March amid significant seasonally-driven volatility in 1Q. A second month of an above-50 reading signalled the economy continued to expand, suggesting stabiliSation is underway.
"Policy support is expected to continue, however, with any rolling back unlikely to start until late 3Q or 4Q, in our view.” Chang Shu and David Qu, Bloomberg Economics. - Bloomberg
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