It feels a bit like the drag of commuting to the office with an unsavory hangover following an over-the-top night out with old college buddies.
The spectacular start China’s economy made during the first three months of 2017 is apparently transitioning into a much more muted second quarter: both official and private surveys show the factory sector grew at a much weaker-than-expected pace in April.
The reasons: output and new orders both rose at their slackest pace since last September, according to the Caixin China General Manufacturing PMI report released on Tuesday, echoing Sunday’s official PMI report, which blamed weaker market conditions both at home and abroad for knocking the index off its five-year high.
Steel sector PMI plunged 6.9 percentage points to 45.1%, deep into contractionary territory, helping to weigh down the group PMI of energy-guzzling industries by 2.1 ppts to 49.3%, the National Bureau of Statistics said in Beijing on Sunday.
Sharp falls in prices of iron ore, steel and other raw materials during April were key to the sector’s turn of fortune thus far into the second quarter. The raw materials price index and selling price index both fell by 7.5 and 4.5 percentage points from March’s readings, to 51.8% and 48.7%, respectively.
The Caixin/Markit PMI fell to 50.3 in April, its slowest pace since September 2016, missing economist forecasts’ of 51.0 and representing a significant decline from March’s 51.2.
“Downward pressure on manufacturing gradually emerged in April, with all indicators weakening,” said Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group.
Production growth and total new orders rose at the slowest pace since last September, with both showing only slight improvement from the previous month.
The official manufacturing PMI fell less sharply but still slid to a six-month low of 51.2 in April from March’s near five-year high of 51.8, according to data released at the weekend. Analysts had expected a reading of 51.6.
Growth in China’s services sector slowed to 54.0 in April, from the previous month’s 55.1, but remained robust. The NBS noted that businesses that served the manufacturing sector saw a sharp 5.2 ppts pullback to 55.8%, while financial business activities paring 7.1 ppts to 56.6%
A flurry of government measures to cool the overheating property market and a slow rise in borrowing costs are expected to tap the brakes on surging property investment and construction eventually.
Those concerns, along with a tightening regulatory crackdown on riskier forms of lending and speculation, saw Chinese stocks post their worst month of the year in April.
Indeed, the degree of business confidence in April was the lowest so far this year, the Caixin survey noted, although companies generally expect output to increase over the next year.
The pace of job shedding also intensified in April to a three-month high as a result of cost-reduction efforts and the non-replacement of voluntary leavers and retirees.
Similarly, the employment sub-index in the official PMI also dipped back into the red (49.2) after surfacing to 50.0 in March for the first time since 2012.