China: PMI manufacturing inches down 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) declined from 50.5% in March to 50.1% in April. Moreover, the print undershot the 50.5% expected by market analysts. Despite the decrease, the index remained above the 50.0% threshold that separates expansion from contraction in the manufacturing sector.
April’s reading reflected a broad-based deterioration as all sub-categories of the index lost ground compared to March. April’s drop was mainly driven by sharp declines in output and inventories, while the remaining components logged smaller decreases. Despite increasing slightly in April, export orders were below the 50%-mark for the 11th consecutive month, highlighting the fragility of global demand. Input prices—a reliable leading indicator for inflation—remained in positive territory in April on stronger domestic activity and higher commodity prices.
Ting Lu, Wendy Chen and Lisheng Wang, analysts at Nomura, warn that:
“The surprisingly big rebound in March activity data is unsustainable, growth has yet to truly bottom out, and the actual slowdown since mid-2018 could be significantly worse than what official statistics have indicated. The dash of stimulus played a key role in pushing up the data in March, which is the first month following the Lunar New Year (LNY) holiday, but the rapid improvement in March data was also a result of some temporary special distortions: 1) the moving LNY holidays; 2) the front-loading as a result of the VAT cut that was announced on 15 March to take effect on 1 April; and 3) the anti-smog campaign from November 2017 to March 2018.”