Manufacturing Growth Slows in April, Official Survey Shows

(Beijing) – Growth in China’s manufacturing sector slowed in April after hitting a five-year high the previous month, as demands and production of traditional industrial sectors slipped, government data showed on Sunday.

The National Bureau of Statistics released its Purchasing Managers' Index (PMI) reading for April at 51.2. That represented a six-month low. In contrast, March's 51.8 was the highest reading since April 2012.

The April reading, above the 50 mark that divides expansion from contraction, indicated that the country’s manufacturing sector remained in expansion but at a slower pace.

Zhao Qinghe, senior analyst at the NBS, said both production and demand weakened in April, as sub-indexes gauging output and new orders stood at 53.8 and 52.3, declining 0.4 and 1 point from the previous month, respectively.

According to Chen Zhongtao, an analyst at China Logistics Information Center, raw material production and other traditional, high energy consumption sectors led the slowdown in April, while advanced manufacturing and high-tech sectors posted higher growth.

NBS data showed that high-energy consumption industries – such as steel refining and chemical – declined to 49.3 in April from 51.4 last month, indicating a contraction.

Chen said the decline of traditional industries was affected by authorities’ stricter requirements on environmental protection, sliding commodity prices and continued efforts to cut industrial overcapacity.

The sub-index of input prices slipped 7.5 points to 51.8, the lowest since July 2016. Indexes of import and export orders both declined slightly to 50.2 and 50.6, according to the NBS.

Growth in China's services sector slowed slightly to 54.0 in April, compared with 55.1 a month earlier, which was the highest since May 2014.

Deng Haiqing, chief economist at Beijing-based JZ Securities, said despite weaker readings, China’s manufacturing activities have remained in expansion since October, indicating a stabilizing economy.

China's economy grew a faster-than-expected 6.9% in the first quarter, with major economic indicators posting across-the-board improvements, boosted by state-backed infrastructure spending and the booming property market. The first-quarter performance got the economy off to a good start to exceed the government’s full-year target of around 6.5%. But some economists cautioned that the country’s recovery hasn’t been solid enough and its growth pace may moderate in the coming months.

“While the production side has continued stabilizing and reviving, domestic demands are still weak,” said Zhu Baoliang, director of the economic forecast department at the State Information Center, an agency under the National Development and Reform Commission (NDRC). Zhu expects GDP growth to slow down slightly in the next few quarters.

JZ Securities’ Deng expects economic growth is likely to slow down in the coming months. This is due to unfolding effects of property market control measures and tightening supervision on financial markets that may push up financing costs for businesses, Deng said.

Contact reporter Han Wei (weihan@caixin.com)