China's April PMI Data Slightly Up But Still In Cotraction

HSBC has published the Markit flash Purchasing Managers Index (PMI) today. The data shows that China’s PMI for the month of April rose to 48.3 from March’s final reading at 48. This shows that the manufacturing downturn has eased slightly but it is still below the mark of 50. This PMI under 50 represents contraction of the manufacturing sector, compared to previous month. 

According to the data released by HSBC, Chinese manufacturers signaled reductions of both output and new orders in the month of April but it was at slower rate. The export orders have slipped back after having a pick up in March. This suggests that the external environment has also remained difficult for the Chinese firms. Due to weak operational activities, the employment has reduced for the month of April, whereas due to reduced volumes of new business, the firms were able to lower their amount of unfinished work.  A less number of new orders also led companies to reduce their purchasing activity in February. 

The input costs and the output prices for the Chinese economy have reduced during the month of April but at a slower rate. The suppliers' delivery time is lengthening.

Earlier to this, China, the second largest economy expanded by 7.4 per cent during the first quarter of the year 2014 as compared to the same quarter of the previous year. China government had set a target to grow at a rate of 7.5 per cent for the full year. This was the slowest pace at which the Chinese economy had grown in the last 18 months after it registered a 7.4 per cent growth in the third quarter of 2012. 

Regarding this data,  Hongbin Qu, Chief Economist for China at HSBC said, “Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted. The State Council released new measures to support growth and employment after the release of Q1 GDP. Whilst initial impact will likely be limited, they signaled readiness to do more if necessary. We think more measures may be unveiled in the coming months and the PBoC will keep sufficient liquidity.”