An official survey has shown that China’s manufacturing industry grew much slower than was expected in the month of April.
Growth In China Manufacturing Slows Faster Than Expected
Demand in the Chinese manufacturing sector slowed down amidst a cooling of producer price inflation and efforts by policy makers to minimize risks in the economy.
According to figures from the National Bureau of Statistics, the Purchasing Managers’ Index fell to its lowest in six months down to 51.2 in April, up from a five year high of 51.8 in March.
Analysts had predicted a score of 51.6, in the ninth consecutive month, well above the 50-point mark that distinguishes between growth and contraction performance each month.
There was a general weakening in demand with the largest fall in the price of input sub index, which tumbled to 51.8. This has been the lowest rate of expansion since last year June from a high of 59.3 in March.
According to Zhou Hao, a Commerzbank economist in Singapore, the recent steep decline in the price of iron ore and onshore steel are an indication of some of the pressure manufacturing companies in the country are facing.
In a note Zhou wrote, “We believe that on one hand this reflects that there is minimal improvements in demand.”
He added, “On the other hand, the de-leveraging effort by authorities in China has begun working.”
Futures of steel and iron ore in China fell to all-time lows at the start of April amid bearish market sentiment on demand outlook. Concerns about a steel glut later this year also increased.
In March, the sub index for employment fell from a high of 50.0 down to 49.2 while the sub index for raw materials inventories remained the same at48.3.
In April, growth in the country’s service sector slowed to 54.0 from a reading of 55.1 in the previous month, the highest since May 2014.
The Chinese economy grew at 6.9 percent in the first quarter, a faster than expected rate. This can be attributed to increased spending on infrastructure and the country’s property boom.
However, as authorities work to cool the property market and as the central bank and regulator for the banking sector make efforts to minimize financial risk, growth is expected to slow.
It is expected that the People’s Bank of China will increase short-term interest rates and intensify its regulation of the finance sector as authorities step up efforts against shadow banking of businesses by banks.
Leaders in China have said they will focus more on addressing property bubbles and financial risks, which according to analysts are a significant threat to the second largest economy in the world if not managed appropriately.
Last week, President Xi Jinping asked for increased efforts to mitigate financial risks to aid in maintaining overall financial security, according to reports by the official Xinhua news agency.