China factory PMI raises doubts about economy's strength

Wed May 1, 2013 5:15am EDT
 
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By Langi Chiang and Jonathan Standing

BEIJING (Reuters) - Growth in China's manufacturing sector unexpectedly slowed in April as new export orders fell, raising fresh doubts about the strength of the economy after a disappointing first quarter.

The official purchasing managers' index (PMI) fell to 50.6 in April from an 11-month high in March of 50.9. Analysts had expected the April PMI to be 51.0.

The pull back on the official PMI mirrored a similar decline in a preliminary HSBC PMI last week, suggesting China's exports engine faces headwinds from the euro zone recession and sluggish growth in the United States.

China's new government has signaled it will step up infrastructure investment, which analysts said will provide support for the economy in the second quarter.

"Overall, my general feel is that China is growing but slower than people expected say a month ago," said Alvin Pontoh, economist at TDSecurities in Singapore.

"But I don't think this is reason for alarm... this is probably what the new administration is looking for. Structurally, China cannot grow at 9 or 10 percent any more, so over the next few years, you'd reasonably expect growth to edge lower to say 7 percent or so".

A string of global data, including lower than expected U.S. economic growth figures, has dented optimism seen at the start of the year that the world economy was picking up.

Market reaction to the PMI was muted as many countries in Asia and Europe are marking May 1 Labor Day holiday. China's markets are closed and will reopen on Thursday.   Continued...

 
An employee works at a steel factory in Dalian, Liaoning province, May 1, 2013. China's official purchasing managers' index (PMI) fell to 50.6 in April from an 11-month high in March of 50.9. REUTERS/China Daily