Economic Watch: Stable factory, service activities point to resilient economy

The steady expansion of China’s factory and service activities in April confirmed sustained momentum in the wider economy.

The steady expansion of China’s factory and service activities in April confirmed sustained momentum in the wider economy.

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The purchasing managers’ index (PMI) for China’s manufacturing sector held steady at 50.1 in this month, the National Bureau of Statistics (NBS) said Tuesday. A reading above 50 indicates expansion, while below reflects contraction.

Although slightly down from 50.5 of a month ago, the PMI was still the second highest since November and stayed above the boom-bust line for two consecutive months, NBS senior statistician Zhao Qinghe said.

Wen Tao, an analyst with the China Logistics Information Center, said the mild retreat was a normal adjustment from the holiday influence and positive signs had emerged in external demand and market prices.

In breakdown, the sub-indices for production and new orders came in at 52.1 and 51.4 respectively, both showing robust momentum. Sub-indices for exports and imports gained for two straight months.

High-tech manufacturing led the stable trend. The PMI of high-tech manufacturers was on a gaining streak for a fourth straight month in April, standing at 52.9, far above the overall level, and they also saw the best improvement in new orders in 10 months.

“Businesses reported better profit margins, in particular the ferrous metal processing industry,” Zhao said. “The performances of small enterprises also improved as recent targeted tax cuts and other policy support began to take effect.”

The NBS also said on Tuesday the service activity eased pace but maintained steady expansion in April as the non-manufacturing PMI came in at 54.3, down from 54.8 in March.

China is trying to shift its economy toward a growth model that draws strength from consumption, services and innovation. The tertiary industry accounted for 57.3 percent of GDP in the first quarter, up 0.6 percentage points from a year ago.

The market rallied on encouraging data. The benchmark Shanghai Composite Index rebounded 0.52 percent to 3,078.34 points, ending a three-day losing streak.

The data came as new evidence of continued growth impetus, following a better-than-expected 6.4-percent GDP increase in the first three months, flat with expansion in the previous quarter.

In the face of lingering downward pressures, China has rolled out a raft of targeted pro-growth measures, with taxes cut for individuals and money-starved small firms, funds pumped to major projects to fix weak areas and restrictions eased for foreign investors.

The rosy start of the economy offered a solid footing for a steady second quarter, Wen said.

However, analysts said more should be done to reinforce the stable trend as Tuesday’s data also showed some weaknesses.

The employment sub-index for manufacturing PMI stayed below 48 for four months running and equipment manufacturing retreated mildly, Wen said, adding that the activity of large and medium-sized enterprises began to slow down.

“Final demand exports, lower-tier cities’ property markets, and passenger car sales are still facing strong headwinds, and this could be a drag on the PMI despite ongoing policy easing and stimulus,” Lu Ting, economist of Nomura International, said in a report.

Tuesday’s PMI is the earliest economic indicator for April, and a series of other data including consumer prices, foreign trade volume, industrial output, investment and retail sales will be released in the coming weeks. (China daily)

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