China’s factory activity growth slows on supply bottlenecks, soft demand

BEIJING (REUTERS) – China’s factory activity expanded at a slower-than-expected pace in April as supply and transport bottlenecks weighed on production and overseas demand lost momentum.

The official manufacturing Purchasing Manager’s Index (PMI) fell to 51.1 in April from 51.9 in March, data from the national Bureau of Statistics (NBS) showed on Friday (April 30).

It remained above the 50-point mark that separates growth from contraction on a monthly basis but was below the 51.7 in a Reuters poll of analysts.

“Some surveyed companies report that problems such as chip shortages, problems in international logistics, a shortage of containers, and rising freight rates are still severe,” NBS statistician Zhao Qinghe said.

China’s economic recovery quickened sharply in the first quarter with record growth of 18.3 per cent, shaking off last year’s Covid-19-induced slump. Analysts now expect the world’s second-largest economy to grow 8.6 per cent in 2021.

The robust economic recovery has outpaced rebounds seen in manufacturing competitors such as India, which are still struggling to contain new waves of coronavirus outbreaks.

The official PMI, which largely focuses on big and state-owned firms, showed businesses again laid off workers in April after increasing hiring the month before for the first time in nearly a year. A sub index for employment slipped to 49.6 from 50.1 in March.

A gauge for new export orders stood at 50.4 in April, slipping from 51.2 a month earlier but remaining in expansionary territory. A sub-index for the activity of small firms stood at 50.8 in April, up from March’s 50.4.

Riding the solid economic recovery, surging demand for raw material fuelled Chinese industrial firms’ robust profit growth in March as profits upstream outperformed those in downstream sectors.

A sub-index for raw material costs in the official PMI stood at 66.9 in April, easing from March’s 69.4 but remaining elevated.

In the services sector, activity expanded for the 14th straight month, but at a slower clip.

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