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Financial News: China Manufacturing Sector Contracts Marginally

China Manufacturing Sector Contracts Marginally

04/30/2020 - 01:27:00 (RTTNews)

(RTTNews) - China's manufacturing sector conditions weakened slightly in April as the impact of the coronavirus globally led to a substantial fall in export sales, survey results from IHS Markit showed Thursday.

The Caixin manufacturing Purchasing Managers' Index fell unexpectedly to 49.4 in April from 50.1 in March. A score below 50 indicates contraction in the sector. The score was expected to rise to 50.3.

Nonetheless, the decline was marginal and much softer than the record pace seen in February when many firms closed down to stem the spread of the virus.

Elsewhere, the official survey from the National Bureau of Statistics showed that private sector expanded at a faster pace in April driven by non-manufacturing activity. The composite output index rose to 53.4 from 53.0 in March.

The official factory PMI fell to 50.8 from 52.0 in March. Meanwhile, the non-manufacturing PMI advanced to 53.2 from 52.3.

After a record fall in February, manufacturers signaled a back-to-back rise in production, survey data from IHS Markit showed. Nonetheless, the pace of expansion was marginal.

At the same time, new orders dropped for the third straight month due to fall in foreign demand. Export orders slid at the fastest rate since December 2008.

Due to fall in new work, firms reduced their staff again in April. Meanwhile, backlog of work increased further as firms continued to process orders from previous months. The weaker order book trend prompted firms to lower their purchasing activity.

Consequently, firms used their current stocks leading to another fall in inventories of input.

Average input costs decreased at the quickest rate in over four years in April amid lower raw material prices. At the same time, output charges declined as firms sought to remain competitive and attract sales.

Weighed down by concerns over the coronavirus pandemic, optimism regarding the 12-month outlook for output dipped to a four-month low in April.

Amid the second shockwave from the pandemic, the problems of low business confidence, shrinking employment and large inventories of industrial raw materials became more serious, Zhengsheng Zhong, chief economist at CEBM Group said.

"A package of macroeconomic policies, as suggested in the April 17 Politburo meeting, must be implemented urgently," the economist said.

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