Without warning, this April, growth in China’s manufacturing sector unexpectedly slowed because new export orders drop. This causes rise in doubts towards the strength of the economy after a disappointing first quarter. While analysts had expected the April PMI to be 51.0 it the official purchasing managers’ index (PMI)fell to 50.6 in April from an 11-month high in March of 50.9. A comparable turn down in a preliminary HSBC PMI in the previous week reflected the recoil on the official PMI, signifying China’s exports engine is encountering an opposite from the euro zone recession and slow-moving growth in the United States. Analysts said it will provide support for the economy in the second quarter if China’s new government has signaled it will step up infrastructure investment. “Overall, my general feel is that China is growing but slower than people expected say a month ago,” said Alvin Pontoh, economist at TDSecurities in Singapore.
But I don’t think this is reason for alarm… this is probably what the new administration is looking for. Structurally, China cannot grow at 9 or 10 percent any more, so over the next few years, you’d reasonably expect growth to edge lower to say 7 percent or so”. A sequence of global data, one of which was lower than projected U.S. economic growth figures, has spoiled hopefulness perceived at the beginning of the year that the world economy was getting better. Many countries in Asia and Europe marked May 1 as Labor Day Holiday thus making market reaction to the PMI unnoticed and hushed. While China’s markets are still closed and will reopen on Thursday. Standard three-month copper fell and weighed on mining stocks in Australia following the PMI figures. But on the other hand, Australian and New Zealand dollars held their ground. From March with 52.3, new orders sub-index fell to 51.7 in April; this is according to the official PMI figures, holding above 50 which separate expansion from contraction compared with a month earlier. Nevertheless, suggesting they were shrinking is the new export orders index fell to 48.6 from 50.9 in March. The lowest in at least four years is the input price sub index fell to 40.1 in April. “The dip in April PMI shows that the foundation for China’s economic recovery is still not solid,” Zhang Liqun, an economist at the Development Research Centre, a top government think tank in Beijing, said in an emailed statement accompanying the index. “All these show the possibility for China’s growth to slow slightly in the future. We must work to stabilize domestic demand and make our economic recovery more sustainable,” he said. From 51.6 in March it fell to 50.5 this April as per HSBC’s preliminary PMI since new export orders shrank. On Thursday the final reading is scheduled to be published.