China’s manufacturing activity shrank in April, official figures showed, as global demand for goods slowed, with Communist Party leaders warning that the post-Covid recovery in the world’s second-largest economy had not yet reached a firm footing.
The Bureau for National Statistics’ purchasing managers’ index fell to 49.2 points compared with 51.9 in March, falling below analyst expectations of 51.4 in a Reuters poll.
China’s non-manufacturing purchasing managers’ index, which covers the services and construction sectors, was 56.4, up from 58.4 in March, but still showing expansion since President Xi Jinping ended the zero-covid policy to rein in the country’s economy in December.
A reading above 50 indicates expansion compared to the previous month, while one below 50 indicates contraction.
“It’s a mixed PMI report and China’s post-Covid recovery has lost some steam and continued calls for policy support,” said Zhou Hao, chief economist at Guotai Junan International, a Hong Kong-based brokerage.
In a sign of China’s economic recovery from last year, state media forecast around 240 million passenger trips during this week’s five-day May Day holiday, more than in 2019 before the pandemic.
But while consumer activity is recovering from a low base, other parts of the economy face deeper challenges, with the property sector still limping after a government crackdown and export markets fading as advanced economies weaken.
In March, China’s PMI showed a similar picture, with growth in manufacturing slowing despite a recovery in exports, while other sectors showed a rapid rise in activity, indicating an uneven recovery.
“Economic growth has exceeded expectations . . . And China’s economy is off to a good start,” the Communist Party’s Politburo said at a meeting on Friday. But the economy’s “content driving force” is “still weak and demand is insufficient,” state media reported the Xinhua Bureau as saying.
Zhao Qinghe, a senior statistician at the NBS, said in a statement on Sunday that the contraction in the manufacturing PMI was due to “sufficient market demand and a high base created by the rapid recovery of the manufacturing sector in the first quarter”.
Manufacturing expanded slightly, but sub-indexes for new orders, raw material inventories and manufacturing employment all fell.
In a note, Goldman Sachs said the non-manufacturing index’s performance was “still solid but below market expectations, suggesting continued recovery in the construction and services sectors, but at a slower sequential pace.”
Part of the recovery in construction was driven by infrastructure, the NBS said. Beijing has used infrastructure to spur growth following a slump in the property sector over the past two years.
The Politburo signaled further support for economic recovery and called for targeted “effective fiscal policy” and “prudent monetary policy”.
“The income of urban and rural people should be increased in many ways . . . and the consumption of services in fields such as culture and tourism should be increased,” the Xinhua Politburo reported.
Nomura predicts that China’s export industries will remain under pressure due to the “current global technology downturn, global financial market turmoil and deteriorating US-China trade relations”.
“Falling exports will continue to hamper the recovery in employment and productive investment,” it said in a statement ahead of the PMI data release.