China April HSBC PMI shows biggest drop in factory activity in a year

Mon May 4, 2015 6:34am EDT
 
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By Kevin Yao

BEIJING (Reuters) - China's factories suffered their fastest drop in activity in a year in April as new orders shrank, a private business survey showed on Monday, hardening the case for fresh stimulus measures to halt a slowdown in the world's second-largest economy.

The latest indication of deepening factory woes raises the risk that second-quarter economic growth may dip below 7 percent for the first time since the depths of the global crisis, adding to official fears of job losses and local-level debt defaults.

The HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 in April - the lowest level since April 2014 - from 49.6 in March, as demand faltered and deflationary pressures persisted.

The number was weaker than a preliminary reading of 49.2, and below the 50-point level that separates growth from contraction compared with the previous month.

"China's manufacturing sector had a weak start to Q2, with total new business declining at the quickest rate in a year while production stagnated," said Annabel Fiddes, an economist at Markit.

"The PMI data indicate that more stimulus measures may be required to ensure the economy doesn't slow from the 7 percent annual growth rate seen in Q1.”

The overall new orders sub-index dipped to 48.7 in April, the sharpest contraction in a year. That suggested a marked deterioration in domestic demand, as new export orders showed tentative signs of improvement.

Both input and output prices declined for a ninth month, while manufacturers shed jobs for an 18th month, auguring poorly for an economy that grew at its weakest rate for six years in the first quarter.   Continued...

 
An employee welds the exterior of a vehicle along a production line at a factory in Qingdao, Shandong province December 1, 2014. REUTERS/China Daily