China’s economy gives little sign of slowdown as PMIs hold up

In Photo: People walk through a footbridge inside the CDF Mall, a duty-free shopping complex operated by China International Travel Service Co. in Sanya, Hainan province, China, on March 14.

China’s economy is giving little sign that a slowdown is approaching, with services strengthening and manufacturing remaining robust.

The official manufacturing purchasing managers index stood at 51.4 in April versus the 51.3 estimate in a Bloomberg survey and 51.5 last month. The non-manufacturing PMI, covering services and construction, rose to 54.8, the statistics bureau said on Monday, beating estimates. Levels above 50 indicate improvement.

In the face of persistent threats to the trade outlook from a dispute with the US and the impact of a credit clampdown, policy-makers have expressed fears that the economy could slow more sharply than the cyclical moderation that’s already anticipated. That said, a cut in the amount of funds that lenders must park at the central bank has buoyed markets, and a mission to China by US trade officials in the coming days may ease tensions.

“We believe the government will manage the situation well and won’t let a trade war take place,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. “Domestic consumption is also resilient, and only investment—local government investment in particular—has slowed a bit, and that’s aimed at controlling debt.”

A gauge of new export orders edged down to 50.7 from 51.3, though remained broadly in line with readings over the past several months. New orders also slipped, to 52.9 from 53.3.

Input prices decreased slightly to 53. Inventories of finished goods, stockpiles of raw materials, backlogs of work and employment all remained about in line with prior readings.

“The numbers are pretty solid,” Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, said in a Bloomberg Television interview. “This news suggests growth momentum is still fine,” though risks still remain, he said.

The steel industry PMI also increased, climbing to a five-month high of 51.7 as gauges of new orders and export orders both expanded from a month ago. The data suggest a recovery in the sector as prices rebounded amid falling stockpiles.

Alternative data signal April output softened. The sales-manager sentiment index published by World Economics Ltd. declined, and Standard Chartered Plc.’s Small and Medium Enterprise Confidence Index slipped from a one-year high the previous month.

Private readings

Private PMI data from Caixin due for release on Wednesday and Friday are projected to show readings for services and manufacturing both at lower levels than the official gauges. The Caixin PMI can better reflect conditions among smaller firms and the private sector.

Economists surveyed by Bloomberg forecast full-year growth of 6.5 percent for 2018, a substantial slowdown from 2017’s 6.9-percent performance. That’s still in line with official targets, and policy-makers are de-emphasizing numerical objectives as they push to strip out financial risk and put expansion on a more sustainable footing.

“The economy is facing a bit of downward pressure,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “A lot recent macro data suggest a little bit of a downward trend, but in general PMI is holding up. Sentiment is stable.”

Image Credits: Qilai Shen/Bloomberg

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