Factory output lifts for second straight month 
2019-05-01
FACTORY activity in China expanded for a second straight month in April but at a slower pace than expected, an official survey showed yesterday.
The official Purchasing Managers’ Index for manufacturing fell to 50.1 in April from March’s reading of 50.5, which was the first expansion in four months, data from the statistics bureau revealed.
It hovered just above the neutral 50-point mark which separates expansion from contraction on a monthly basis. Analysts surveyed by Reuters had forecast the PMI to match March’s 50.5.
“For now, the official PMIs suggest that Q2 got off to a weaker start and reinforces our view that there are still some downside risks to near-term activity,” Julian Evans-Pritchard, senior China economist at Capital Economics, said.
But the survey did not show a marked deterioration in business conditions.
Output expanded at a slower but still moderate pace, while growth in new orders eased only slightly.
A spokesperson for the statistics bureau said earlier this month that many firms had brought forward purchases of input materials ahead of a tax change in order to increase their deductions.
A PMI sub-index for inventories of raw materials retreated significantly from March’s seven-month high.
A gauge of construction activity fell to 60.1 from 61.7 in March, still solid but possibly indicating that the government’s infrastructure push may be losing steam despite a burst of bond issuance and new bank lending at the start of the year.
China has unveiled tax and fee cuts amounting to 2 trillion yuan (US$297 billion) to ease burdens on firms, while allowing local governments to issue 2.15 trillion yuan of special bonds to fund infrastructure projects.
Another official survey yesterday showed growth in China’s services industry also cooled in April, though it remained in solid expansionary territory.
While new factory orders remained sluggish, there were some encouraging signs on the export front.
The official PMI survey showed small manufacturers’ activity improved to a six-month high, suggesting that policy makers’ efforts to support the struggling private sector are starting to bear fruit.
Big state-run banks have been told to increase lending to smaller firms by 30 percent this year, and the central bank has been guiding shorter-term money market interest rates lower.
Profits may already be turning the corner. China’s industrial firms reported higher earnings in March after four months of contraction.
Better-than-expected March data had prompted a major shift in the market’s expectations for more stimulus this year, with analysts and investors scaling back forecasts for the timing and size of further support measures.
China’s economy grew at a steady 6.4 percent pace in the first quarter, defying expectations for a further slowdown.
