28/04/2020
BEIJING (Reuters) – China’s factory activity likely rose for a second straight month in April as more businesses re-opened from strict lockdowns implemented to contain the coronavirus outbreak, which has now paralysed the global economy.
The official manufacturing Purchasing Manager’s Index (PMI), due for release on Thursday, is forecast to fall to 51 in April, from 52 in March, according to the median forecast of 32 economists polled by Reuters. A reading above the 50-point mark indicates an expansion in activity.
While the forecast PMI would show a slight moderation in China’s factory activity growth, it would be a stark contrast to recent PMIs in other economies, which plummeted to previously unimaginable lows.
That global slump, caused by heavy government-ordered lockdowns, as well as the cautious resumption of business in China, suggests any recovery in the world’s second-largest economy is likely to be some way off.
“The recovery so far has been led by a bounce-back in production, however, the growth bottleneck has decisively shifted to the demand side, as global growth has weakened and consumption recovery has lagged amid continued social distancing,” Morgan Stanley said in a note.
“The expected slump in external demand has likely capped further recovery in industrial production.”
The latest official data showed 84% of mid-sized and small business had reopened as of April 15, compared with 71.7% on March 24.
Hobbled by the coronavirus, China’s economy shrank 6.8% in the first quarter from a year earlier, the first contraction since current quarterly records began.
That has left Chinese manufacturers with reduced export orders and a logistics logjam, as many exporters grapple with rising inventory, high costs and falling profits. Some have let workers go as part of the cost-cutting efforts.
A China-based brokerage Zhongtai Securities estimated that the country’s real unemployment rate, measured using international standards, could exceed 20%, equal to more than 70 million job losses and much higher than March’s official reading of 5.9%.
Sheng Laiyun, deputy head at the statistics bureau, said on Sunday migrant workers and college graduates are facing increasing pressures to secure jobs, while official jobless surveys show nearly 20% of employed workers not working in March.
Chinese authorities have rolled out more support to revive the economy. The People’s Bank of China earlier in April cut the amount of cash banks must hold as reserves and reduced the interest rate on lenders’ excess reserves.
Source: Reuters
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31/03/2020
- Despite PMI data showing a return to growth in both the manufacturing and non-manufacturing sectors, China’s economic activity is still far from normal
- Headwinds include the threat of global recession, a second wave of coronavirus infections and a property slump, analysts warn
China’s economy has shown signs of recovery after a dismal start to the year. Photo: Xinhua
China’s economy showed signs of a recovery in March after a nationwide lockdown paralysed business in February, but analysts warned that it is not yet out of the woods.
Despite
stronger-than-expected government data released on Tuesday, a series of threats lying ahead could derail China’s fragile recovery, including a second wave of infections, a global recession, worsening deflation due to plunging oil prices and a potentially sharp fall in the property market.
“While the lowest point is behind us, it’s not the time to celebrate,” said Larry Hu, chief China economist at Macquarie Bank.
For now, March’s figures suggest that business conditions are improving considerably, as more people are able to return to work and coronavirus cases continue to fall.
While the lowest point is behind us, it’s not the time to celebrateLarry Hu
The official purchasing managers’ index (PMIs) surveys showed that both the manufacturing and services sectors returned to growth in March, with many factories and retailers reopening as mainland authorities got the pandemic under control.
It will be welcome news for Beijing after a series of economic data plunged to all-time lows in January and February – including February’s PMIs, which are viewed as leading indicators of the state of the economy for the month ahead.
The manufacturing PMI, a survey of sentiment among factory owners, bounced back to 52.0 in March from 35.7 in February, which was an all-time low by some distance.
China’s non-manufacturing PMI – including both the services and construction sectors – was even weaker in February at 29.6, but its recovery to 52.3 was more marked.
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A number above 50 signifies growth in sector activity, while a number below indicates contraction.
Both indices were significantly higher than expected and produced the V-shaped recovery in sentiment that policymakers had been so desperately pursuing.
But analysts warned that this may be short-lived as virus containment measures are set to sap demand
across the globe, hitting China’s exports hard.
This was perhaps reflected in the fact that while many key components of the PMIs returned to growth in March, new export orders remained negative at 46.4.
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“We would like to emphasise that the 52 reading [for manufacturing PMI] actually means a weak business resumption,” said Lu Ting, chief China economist at Nomura.
“We view the jump in both the manufacturing and non-manufacturing PMIs in March as one-off gains from the very low comparison bases in February.”
The dramatic collapse of the economy in the second month of the year meant March’s economic data was always likely to show a positive spike, with PMIs highly sensitive to short-term fluctuations in business conditions due to the way they are collated. Researchers simply ask respondents if things are better or worse than they were the previous month.
“This does not mean output is now back to its pre-virus trend,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note. “Instead, it simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels. This is consistent with what the daily activity indicators show.”
It simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levelsJulian Evans-Pritchard
Even the Chinese government urged caution against reading too much into the figures.
“We cannot say China’s economy has fully returned to normal levels based on a single month. We need to continue observing changes in the following months,” said a National Bureau of Statistics spokesman, adding that 96.6 per cent of large and medium-sized businesses were back to work as of March 25.
The official PMI survey, which is produced by the National Bureau of Statistics, is weighted more towards larger companies, including state-owned firms that have been the focus of government efforts to review production.
The Caixin-Markit manufacturing PMI data set to be published on Wednesday is weighted more towards smaller, private-sector firms and could show a less buoyant result given their struggles to resume operations.
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Officials in Beijing have been vocal in recent days about their concerns of a possible
. At a press conference in the capital on Monday, vice-minister of industry and information technology Xin Guobin said that small businesses and exporters might “struggle to survive” in the months ahead, due to global economic turbulence.
That was reflected in a new study by investment firm Fidelity International that showed while more than half of restaurants in China have reopened, daily turnover was 40 to 50 per cent below levels seen before the outbreak. Hotel occupancy figures, meanwhile, remain in single digits.
“Expect further slack in quarters three and four, which means the authorities will have to postpone their target to double gross domestic product growth levels to the first half of 2021,” said Carlos Casanova, Asia-Pacific economist at insurer Coface.
Source: SCMP
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