China Factory PMI Eases Slightly in April
By Suyang Zhou - Research Analyst
China's manufacturing PMI edged down 0.1 ppt to 51.4% in April 2018. Although April manufacturing PMI was slightly below the average level of 2017 (51.6%), it was higher than the 1Q2018 average (51%) and April 2017 (51.2%). Against this backdrop, manufacturing PMI remains in expansionary territory for 21 consecutive months. Non-manufacturing PMI and composite PMI slightly improved in April reaching 54.8% and 54.1%, respectively, 0.2 ppt and 0.1 ppt higher than their March levels.
Overall, major headline PMIs were still above breakeven point (50%), indicating the economy is still resilient.
Drilling into the five breakdown items of manufacturing PMI, production (53.1%) remained flat, while new orders (52.9%) edged down by 0.4 ppt, showing that the manufacturing demand has continued to grow, albeit slowing down marginally. Materials inventory trended down 0.1 ppt to 49.5%, indicating manufacturers are continuing to de-stock materials. Employment descended 0.1 ppt to 49%. Supplier deliveries climbed 0.1 ppt to 50.2%, indicating faster delivery time of raw materials in the manufacturing industry.
On the other hand, foreign trade demand slowed down in April. New export orders (50.7%) and import orders (50.2%) decreased by 0.6 ppt and 1.1 ppt, respectively. This data is not a positive attribute against the backdrop of trade tensions. Looking ahead, Chinese foreign trade might face more headwinds. Thus, it makes sense why the Chinese central leadership stressed ‘to expand domestic demand continuously’ in the recent Politburo meeting.
Domestic orders, measured by the difference between new orders and new export orders, slightly bounced back by 0.2 ppt.
Further, the difference between material and finished goods inventory, the so-called manufacturers' willingness of re-stocking, kept flat in April.
With regard to price levels, input price decreased 0.4 ppt to 53% while output price headed up 1.3 ppt to 50.2% in April. Their difference shrank, however, which is a positive sign for improved profitability.
Looking into manufacturing PMI by enterprise category, PMI levels in large, medium and small enterprises all remained in expansionary territory for a second consecutive month.