BEIJING May 2 Factory-sector growth in China
and India stumbled in April to further underline the impact of a
fragile global economy, which is under pressure from the euro
zone recession and fresh signals of weakness in the United
Reports on Wednesday showed manufacturing growth in the
United States eased in April, while figures due later on
Thursday from the euro zone are expected to show the sector
there firmly entrenched in contractionary territory.
The purchasing managers indexes add to a string of economic
data that has dented optimism seen at the start of the year,
when there had been some signs the world economy was picking up.
The PMIs weighed on financial markets, partly reinforcing
expectations that the European Central Bank will ease policy
later on Thursday to help revive a regional economy where
unemployment stands at a record high.
"Market tone is dictated by the tug-of-war between growth
prospect worries and support from sustained monetary stimulus,"
said Hirokazu Yuihama, a senior strategist at Daiwa Securities
The Chinese economy "is fragile and vulnerable to outside
shocks, namely the U.S. economy, which is showing signs of
pausing", Yuihama said.
China's official PMI fell in April to 50.6 from 50.9 in
March, while the HSBC PMI dropped to 50.4 from 51.6 as new
export orders fell. Fifty divides expansion from contraction on
a monthly basis.
"The slower growth of manufacturing activity in April
confirmed a fragile growth recovery of the Chinese economy as
external demand deteriorated and renewed destocking pressures
built up," said Qu Hongbin, chief China economist at HSBC.
"Looming deflationary pressures also suggest softer overall
demand conditions. All this is likely to weigh on the labour
market, which is likely to invite more policy responses in the
coming months," Qu said.
The data underlined concerns that China's economic growth is
struggling to pick up after a disappointing first quarter. A
Reuters poll suggested growth would pick up in the second
quarter to 8.0 percent after 7.7 percent in the first quarter,
but analysts said forecasts were now at risk of a downgrade.
"The external sector is likely to be a major headwind for
Chinese growth in the coming months," Barclays said in a client
"The across-the-board declines in the PMI reports point to
soft industrial activity as we enter the second quarter. We
maintain our growth forecast of 7.9 percent (2013 annual) which
we have held since last December, but see some downside risks,"
New export orders were rising in both South Korea and Japan
in April but at a slower pace than in March, PMIs showed.
Japan's PMI, released earlier this week, was the highest in
just over a year at 51.1, the latest evidence that Prime
Minister Shinzo Abe's aggressive economic policies are
benefiting the economy.
"This would represent a solid growth performance,
maintaining the trend that was observed in the first quarter of
the year and latest anecdotal evidence suggests a weaker yen is
playing a part in the expansion by raising export volumes," said
Paul Smith, senior economist at Markit, which produces the PMI
South Korea's overall PMI also rose in April, as domestic
new orders more than offset the impact of the cooling in
India's factory sector, which is mostly geared to domestic
demand, lost further momentum in April as output growth slipped
to its weakest level in more than four years. However, unlike
China, new export orders perked up to suggest some support for
output in the months ahead.
Asia's third-largest economy is already facing its worst
economic slowdown in a decade and faltering growth in the
factory sector will bolster expectations for a central bank rate
cut on Friday.
In the United States, the Institute for Supply Management
said its PMI fell in April to 50.7 from 51.3 with a noticeable
pull back in employment growth, pointing to a risk that the
government's April jobs report due on Friday may fall short of
The Markit PMI also fell, to 52.1, its lowest level since