Economic activity in China across both manufacturing and services sectors declined in April – PMI
Recent data from China reveals a deceleration in growth across both the manufacturing and services sectors in April, indicating a loss of momentum for the world’s second-largest economy at the start of the second quarter. Although strong first-quarter GDP figures have lessened the pressure for further stimulus, the slowdown in activity highlights challenges for policymakers.
China’s manufacturing purchasing managers’ index (PMI) fell to 50.4 in April from 50.8 in March, slightly exceeding expectations but still pointing to growth, while the services PMI declined to 51.2 from 53.0, falling short of forecasts.
The private Caixin factory survey, which targets smaller, export-oriented firms, showed an increase in manufacturing activity growth, driven by a rise in new export orders.
In response to the economic downturn, China has unveiled plans to support the economy, utilizing measures such as adjustments to banks’ reserve requirement ratios (RRR) and interest rates. However, the global economic environment, with central banks like the US Federal Reserve hesitant to cut interest rates, may continue to weigh on external demand for Chinese goods.
China faces immediate challenges, including a prolonged property downturn and rising local government debt, affecting both household and investor confidence. Despite multiple rounds of support for the real estate sector, indicators like new home sales and construction continue to decline sharply.
The stronger-than-expected first-quarter growth provided some optimism, but weaknesses in March’s data, including retail sales, industrial profits, and property investment, raise concerns about China’s capacity to sustain a wider economic recovery.
China aims for a GDP growth target of around 5.0% for 2024, which analysts view as ambitious without further stimulus. While a cyclical recovery is expected in the short term, backed by fiscal measures, there are significant risks, including trade barriers, a deeper property construction downturn, and decreased local government infrastructure spending.
