Wednesday, May 1, 2013


China Manufacturing Weakens

Data Suggest Upturn in Country's Momentum Remains Fragile

BEIJING—A gauge of China's manufacturing activity showed fresh signs of weakness in April, undercutting hopes of a stronger upturn in demand from the world's second-largest economy.

The official Purchasing Managers' Index came in at 50.6 in April, below expectations of a reading in line with the 50.9 recorded in March.

The data, announced Wednesday by the China Federation of Logistics and Purchasing, was still in expansionary territory, giving some cause for cheer. A reading above 50 shows expansion while anything below that denotes contraction.
But it suggested that the upturn in momentum that began in the fourth quarter, after weaker growth for much of last year, is still fragile as China grapples with a sluggish global economy and less-than-robust demand at home.

"The slight fall in the PMI reading for April shows that the economic recovery is still not on a solid foundation," the CFLP said in a statement.

The tepid PMI figure follows unexpectedly weak economic growth of 7.7% year-on-year in the first quarter, down from a 7.9% rise in the final three months of last year.

It also followed an anemic 8.9% gain in industrial output in March, down from 9.9% in February, while profits in the industrial sector were surprisingly soft in March, rising just 5.3% after a 17.2% advance in January-February.
And it came on the heels of a weak "flash" or preliminary reading of the HSBC HSBA.LN +0.38% PMI, a competing measure of manufacturing activity, which showed a drop to 50.5 in April from 51.6 in March.

"We believe the second quarter will be about the same as the first quarter," said Barclays BARC.LN +1.80% Bank economist Steven Yang.
"New orders were still weak, and China's exports may face difficulties due to global uncertainties," Mr. Yang said, adding that Barclays expects some investment banks to cut their full-year growth forecast soon.

All but one of the official PMI subindexes—with the exception of a steady measure of raw material stockpiles—were down in April from the previous month.

The drop in new orders and new export orders were of particular concern, pointing to problems ahead in the export sector, a key engine of growth, at a time when China is still trying to control speculative activity in the domestic property market, another of its growth-drivers.

Exports were up 10% in March after a 23.6% rise in January-February period, but there have been questions about the reliability of those figures amid suggestions that the numbers may have been inflated by false reporting by exporters in a bid to collect tax rebates.

But not everyone was seeing the glass half-empty.

"The PMI is lower than expected but it is still in expansion territory indicating that the recovery is still ongoing," said J.P. Morgan JPM +0.18% economist Zhu Haibin. "We may see uncertainties in the momentum, however."

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