The rumbling of factories in China has slowed down. A sudden decline in China’s manufacturing activity has been recorded in April. This indicates that despite opening the economy, the path of economic recovery in China is not easy and it may take time.
Manufacturing PMI below 50
According to the news published in Bloomberg, China’s Manufacturing Purchasing Managers’ Index (PMI) has fallen from 51.9 in March to 49.2 in April, China’s National Bureau of Statistics has released these official figures on Sunday. PMI going below 50 means that China’s manufacturing is shrinking. Going above 50 indicates expansion. PMI has come below 50 for the first time in December. The PMI was estimated at 51.4 in Bloomberg’s Economist survey.
‘Post Covid recovery missing’
The non-manufacturing index of activity in the services and construction sectors declined to 56.4 from 58.2 in March, while economists had expected the index to reach 57. Zhou Hao, chief economist at Guotai Junyan International Holdings Ltd., said, “This is a mixed PMI report and suggests that China’s post-Covid recovery has somewhat disappeared and calls for continued policy support.”
The Politburo of the Communist Party – the top decision-making body led by President Xi Jinping – said on Friday that recovery in the face of insufficient domestic demand needed continued “tremendous” fiscal and monetary support. The institute indicated a cautious outlook keeping the policy largely unchanged.
China, the world’s second-largest economy, posted the fastest growth in the last quarter, fueled by consumer spending as Covid restrictions eased and activity picked up.
Banks increased annual growth forecast
Many major banks had increased their annual growth estimates to about 6% or more. Due to which it is expected that the economy will perform better than Beijing’s target of about 5% growth.
After this unprecedented contraction in manufacturing activity, there is uncertainty whether the recovery can continue further. The rebound in the property sector has only just begun, while investment continues to decline. Industrial companies are struggling to turn a profit and youth unemployment is near record highs.
NBS senior statistician Zhao Qinghe said in a statement accompanying the data release that the “decline in the manufacturing gauge” was due to factors including sluggish market demand and a higher base in the first quarter. When the manufacturing industry recovered rapidly. Some analysts, including Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, also pointed to fewer working days in April due to public holidays as one of many reasons for the decline in factory activity.