China: Manufacturing PMI records worst reading since February 2020 in April; non-Manufacturing PMI plummets
April 30, 2022
The National Bureau of Statistics' Manufacturing Purchasing Managers' Index (PMI) fell to 47.4 in April from March's 49.5. April's result marked the weakest reading since February 2020, at the height of the first wave of the pandemic, and was driven by Covid-19 restrictions imposed on large areas of the country. As a result, the index fell further below the 50.0 no-change threshold, signaling a sharper deterioration in business conditions compared to the previous month. The headline print reflected a sharper deterioration in output and weaker new orders. Meanwhile, purchasing activity softened in the surveyed month. Moreover, delivery times slowed significantly, while export orders deteriorated.
The National Bureau of Statistics' non-Manufacturing PMI came in at 41.9 in April, down from March’s 48.4. This was largely driven by a tumbling services sector, as the construction sector remained in expansionary territory. Plummeting new orders were the key driver behind the lower non-Manufacturing PMI reading. Caixin PMI data, which covers smaller, export-oriented firms in coastal regions, painted a similarly gloomy picture for both the manufacturing and services sectors.
Analysts at Nomura were downbeat regarding the near-term outlook:
“Looking to May, we expect the official manufacturing and non-manufacturing PMIs to rebound to 48.5 and 47.5, as caseloads appear to be moderating and thus fewer cities could be placed under lockdowns. However, we remain deeply concerned about growth, as the Shanghai lockdown may continue for a few more weeks, the Covid situation in Beijing is still quite uncertain, the pace of business resumption in reopening regions could be slow amid the new normal of day-to-day mass testing and as Beijing has dug in its heels with a strict zero-Covid Strategy.”
Author: Oliver Reynolds, Economist