Manufacturing Sector in China Shows Slower Recovery... PMI Rebound Narrows

March Manufacturing PMI Records 50.4...Below Expectations

China's economic recovery appears to have somewhat stalled recently. Key economic drivers such as domestic demand and exports, which had strongly rebounded at the beginning of the year, have lost momentum, while manufacturing indicators fell short of expectations, reducing the extent of the rebound.

On the 30th, China's National Bureau of Statistics announced that the manufacturing Purchasing Managers' Index (PMI) for April recorded 50.4. This figure is below both the forecast of 50.7 by market research firm Trading Economics and the previous month's figure of 50.8.

[Image source=Reuters Yonhap News]

The manufacturing PMI is compiled based on surveys of purchasing managers from 3,200 companies, including large state-owned enterprises, and is a representative indicator of economic trends in the related sector. A figure above 50 indicates an expansion phase, while below 50 indicates a contraction phase. The non-manufacturing (services) PMI announced on the same day recorded 51.2, significantly down from the previous month's 53.0.

Various economic indicators in China have shown a sluggish trend compared to the beginning of the year. According to the National Bureau of Statistics, China's industrial production in March increased by 4.5% compared to the same period last year. This is weaker compared to the growth rate of 7.0% in January and February. The increase in retail sales also slowed from 5.5% in January and February to 3.1% in March.

China's Consumer Price Index (CPI) rose 0.7% in February but only increased by 0.1% in March, raising concerns about deflation (a decline in prices amid economic downturn). Industrial profits in the first quarter of this year increased by only 4.3% year-on-year. While January and February saw a 10.2% increase, March recorded a 3.5% decrease, pulling down the overall growth trend.

Exports, which had driven China's economy at the beginning of the year, are in a similar situation. China's export value (in US dollars) increased by 7.1% in January and February but turned to a 7.5% decrease in March, significantly below the forecast of -3.0%. The National Bureau of Statistics pointed to the slowdown in demand from major global countries, including the United States, as the background.

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