A Chinese manufacturing gauge signaled a fourth month of contraction, indicating that government efforts to counter an economic slowdown have had only a limited impact.
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 48.3 in April, matching the median estimate of analysts surveyed by Bloomberg News. While that was higher than the final March figure of 48, the reading remains below the level of 50 that is the dividing line between expansion and contraction.
Sustained weakness in manufacturing would pressure Premier Li Keqiang to expand efforts to support growth beyond what some analysts have dubbed a “mini stimulus” package of railway spending and tax relief. Data last week showed that China’s expansion moderated to the slowest pace in six quarters and property construction plunged, testing commitment of leaders to keep reining in credit.
“Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident as both new export orders and employment contracted,” said Qu Hongbin, an economist at HSBC in Hong Kong. He said that more measures may be unveiled in coming months to support growth.
Estimates from 25 analysts of Tuesday’s number ranged from 47.5 to 49.4.
The State Council, or cabinet, on April 2 outlined a package of spending on railways and housing and tax relief to support growth. The government said April 20 that China will start construction on a batch of major energy projects as part of efforts to stabilize expansion and adjust the nation’s energy structure.
China is trying to balance supporting growth with curbing shadow banking, eliminating overcapacity and reducing pollution. The economy is forecast to expand 7.4 percent this year, according to a Bloomberg survey of analysts last month, which would be the slowest pace since 1990. Growth was 7.7 percent in 2012 and 2013.
The manufacturing report, known as the Flash PMI, is typically based on 85 percent to 90 percent of responses to surveys sent to purchasing managers at more than 420 companies. The final reading will be released on May 5.
Signs in the PMI of a contraction don’t indicate that manufacturing is shrinking on an annual basis. Factory output rose 8.8 percent in March from a year earlier.
China’s economy grew 7.4 percent in the first quarter from a year ago, the statistics bureau said April 16.
Premier Li said last week that the government isn’t considering stronger stimulus and that growth a bit higher or lower than 7.5 percent can be deemed to be in a reasonable range, according to a government statement after a State Council meeting. China will maintain a “prudent” monetary policy and a “proactive” fiscal stance and will ensure the 2014 growth target can be reached through reform and changes to the structure of the economy, Li said.
On May 1, the National Bureau of Statistics and China Federation of Logistics and Purchasing will publish their own survey of purchasing managers at about 3,000 manufacturing companies. The official gauge’s March reading was 50.3, after an eight-month low of 50.2 in February. (Bloomberg)
