China: Manufacturing Sees Small Recovery.
April 24th 2012 – Australasian Investment Review – (AIR)
Another month of contraction for Chinese manufacturing, but the chances of so-called soft landing for the economy have been reinforced by the latest flash estimate on sentiment from the sector for April.
The HSBC Flash Purchasing Managers Index, the earliest indicator of China’s industrial activity, recovered slightly to 49.1 this month from a final reading of 48.3 in March, but that was still remained below the 50 level that signifies contracting economic activity.
The news came as markets across Asia eased on worries about the impact of the French election and concerns about the eurozone’s stability.
Investors saw the news from China’s manufacturing sector as being essentially positive, and not a surprise.
It was the sixth successive month of contraction, but there was a stronger sense that the situation has steadied, as much of the official economic data for March earlier this month had suggested
“The index pointed to a slower pace of deterioration than in March, largely reflecting slower rates of decline of manufacturing production and new orders,” Markit Economic Research, which publishes the index, said yesterday.
The HSBC Manufacturing PMI index has not been consistently above 50 since June 2011, although it is far above readings of the low-40s reached during the depth of the global financial crisis in late 2008 and early 2009.
Measures of output ticked, new business and export orders have all improved, according to the early returns from the survey, which mostly reports from small and medium businesses on China.
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:
“As April flash PMI ticked higher, this suggests that the earlier easing measures have started to work and hence should ease concerns of a sharp growth slowdown.
“That said, the pace of both output and demand growth remains at a low level in an historical context and the job market is under pressure.
“This calls for additional easing measures in the coming months. We expect monetary and fiscal easing to speed up in 2Q,” he wrote in yesterday’s statement.
The new orders sub-index, which carries the heaviest weight of the five components making up the overall PMI, bounced to 48.9 from the four-month low seen on the March flash index, just behind the reading on the output index which failed to rebound past the 50 mark.
The small rise indicates a slight acceleration of manufacturing activity in China, compared with lows at the beginning of this year, helped by new export orders.
That sub-index signaled a very slight contraction as it delivered its strongest reading since January.
China’s official PMI hit an 11-month high of 53.1 in March and saw an uptick in exports and new orders.
China’s annual rate of GDP growth slowed to an annual rate of 8.1% in the three months to March, down from Q4 2011′s 8.9%.
The quarter on quarter rise was 1.8%.
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