China's factories are still growing despite global risks
What's the story
China's factory activity has exceeded analysts' expectations for April, although the growth rate has slowed compared to last month. The official manufacturing purchasing managers' index (PMI) reading stood at 50.3, higher than the 50.1 predicted by Reuters-polled economists. However, this is a decline from March's year-high, indicating a deceleration in industrial expansion due to weaker new orders.
Sector performance
Non-manufacturing PMI slips to 49.4
The non-manufacturing PMI has also slipped into contraction territory at 49.4, down from March's 50.1. This indicates a contraction in services and construction activity. Meanwhile, China's composite PMI dipped to 50.1 from March's 50.5, further highlighting the slowdown in economic growth across various sectors of the economy during this period.
Economic insight
Domestic demand shows signs of weakness
Hao Zhou, head of research and chief economist at Guotai Junan International Holdings, said that while industry remains relatively strong, services and domestic demand are showing signs of weakness. This has kept internal demand high on the policy agenda. Despite the slowdown in new orders growth, Zhou noted that output and new orders continue to be key supports as both remain in expansion territory.
Export growth
Manufacturing sector resilient amid global uncertainties
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the PMI index shows the manufacturing sector hasn't been impacted by the Middle East conflict. He noted that the new export order index rose above 50 for the first time in two years. The new export orders sub-index increased to 50.3 in April, indicating a recovery in China's manufacturing sector amid global uncertainties.
Survey results
Private PMI survey also shows strong manufacturing performance
Along with the official data, a private PMI survey by RatingDog and S&P Global also showed strong manufacturing performance. The manufacturing PMI stood at 52.2 against an expected reading of 51—the best since December 2020. "Solid demand, improved operations, and new product launches jointly drove output to its highest growth rate in nearly two years," RatingDog said.