China: Manufacturing PMI remains in positive territory in April
The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from 52.0% in March to 50.8% in April. The print was slightly below the 51.0% expected by market analysts. As a result, the index remained above the 50.0% threshold that separates expansion from contraction in the manufacturing sector.
April’s print reflected lower readings in four out of the five sub-components, with new orders leading the pack. Against a backdrop of a somber outlook for global trade in the wake of the Covid-19 outbreak, export orders dipped noticeably in the month. Lower oil prices weighed on input prices—a reliable leading indicator for producer inflation—sending the index to an over five-year low.
Despite remaining in positive territory, it is still too early to state that the economy is expanding again. As Iris Pang, Greater China economist at ING, comments:
“The Western world has yet to relax some of its city lockdowns. And even after the lockdowns are relaxed, it is uncertain when demand will return to pre-Covid levels due to strict social distancing measures implemented domestically and in foreign economies. […] We have already seen reports of China’s factories laying off workers due to foreign buyers withdrawing orders. Factories‘ profits will fall throughout the supply chain in China as both output prices and input prices fell from the sub-index of the manufacturing PMI. This will hit employment and wages and therefore domestic demand.”