Chinese manufacturing activity shrinks in April - Caixin PMI

Investing.com -- Chinese manufacturing activity unexpectedly contracted in April, a private survey showed on Thursday, as factories grappled with slowing output amid a slowdown in foreign and local demand.

The Caixin Manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 in April, missing expectations for a reading of 50.3. The data was also weaker than March’s reading of 50.0, with a reading below 50 signaling contraction.

Manufacturing activity contracted for the first time in two months, and showed that an economic rebound after the lifting of anti-COVID measures was running out of steam. 

Sluggish demand was the biggest factor behind the weak data, with local manufacturers winding down output amid high inventory levels and weak buying. 

Worsening economic conditions across the globe also severely crimped demand for Chinese exports, which in turn spurred renewed weakness in the manufacturing sector.

Thursday’s reading comes in line with a government survey released earlier this week, which also showed that China’s manufacturing sector unexpectedly contracted in April. But the Caixin survey differs from the government's reading in that it targets smaller, private manufacturers, while the official survey covers larger state-owned enterprises.

Analysts questioned whether a first-quarter rebound in the Chinese economy was sustainable, given the weakness in manufacturing. Data in April showed that China's economy grew more than expected in the first quarter of 2023.

“It remains to be seen if the rebound is sustainable after a short-term release of pent-up demand. The Caixin China manufacturing PMI in April, in particular, pointed to the fact that the economic recovery has yet to find a stable footing,” Wang Zhe, Senior Economist at Caixin Insight Group said in a note.

While the Caixin survey showed that local manufacturers were still optimistic over a recovery in demand this year, it said a rebound was yet to materialize.

With both private and government surveys signaling a decline in Chinese manufacturing, a broader economic recovery in the country is likely to remain elusive this year.