On Friday (April 30), the National Bureau of Statistics of the Communist Party of China announced that the official manufacturing purchasing managers’ index (PMI) fell more than expected to 51.1 in April from 51.9 in March, below the median estimate of 51.6 by economists previously surveyed by The Wall Street Journal and below the median estimate of 51.8 by economists compiled in a Bloomberg survey; the non-manufacturing index, which measures construction and service sector activity, fell to 54.9, below economists’ expectations of 56.1. The non-manufacturing index, which measures activity in the construction and service sectors, fell to 54.9, below economists’ expectations of 56.1.
Bloomberg reported that China’s official manufacturing index declined in April, while the services index also weakened, indicating a slowdown in the pace of China’s economic recovery.
The Wall Street Journal reported that Friday’s official data showed continued weakness in the service sector, underscoring economists’ concerns that domestic consumption in China is a persistent weak spot in the recovery and will be a drag on the country’s economy in the months ahead.
Whether Chinese residents are willing to spend their hard-earned yuan on consumption will depend in part on the health of the labor market, which still doesn’t look too promising, the report said.
Friday’s data showed that both the official manufacturing and non-manufacturing PMI employment classifications fell further in contraction territory in April.
The slow recovery in China’s job market will continue to dampen domestic consumer spending, according to Rui Wang, an economist at ANZ (Australia and New Zealand).
Compared with the first quarter of 2019, China’s national per capita consumption expenditure grew by a two-year average of 3.9% in nominal terms and 1.4% in real terms in the first quarter of 2021, with the real growth rate still 4.0 percentage points lower than the same period in 2019.
Li Qilin and Sun Yongle, macro analysts at Hongta Securities, commented that from the demand side, domestic demand did not recover too well and the new order index fell back, mainly because corporate profits were eroded against the backdrop of the continued rise in commodities, making the repair of residents’ balance sheets relatively slow.
The official manufacturing PMI in April was 51.1, down 0.8 percentage points from the previous month, said Liang Zhonghua, chief macro analyst at the China Tai Securities Research Institute. PMI is an important indicator representing the economy’s cyclical trend, and the super-seasonal drop in PMI in April reflects that economic growth momentum continues to return to the downward channel after the short-term disturbance.
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