Chinese factory activity continued to expand last month, data showed yesterday, but analysts warned that the outlook remained clouded by battered overseas demand, as the rest of the world struggles to overcome the COVID-19 pandemic.
While the nation ramps up economic production as daily life slowly gets back to normal following weeks of strict lockdown measures, its crucial markets in the US and Europe remain virtually shut down.
The closely watched manufacturing purchasing managers’ index (PMI) came in at 50.8, just above the 50 mark that separates expansion and contraction, but down from the previous month and slightly short of expectations.
Photo: EPA-EFE
Still it is a significant improvement on the record-low 35.7 posted in February, when major cities were forced to shut down to prevent the disease’s spread.
Zhao Qinghe (趙清河), senior statistician at the Chinese National Bureau of Statistics (NBS) which released the data, said that demand was recovering at a slower pace than production in industries including textiles and chemical raw materials.
“The spread of the pandemic is accelerating overseas, and global economic activity has contracted sharply,” he said.
The NBS data also found that nearly 60 percent of companies surveyed reported “insufficient orders,” and Zhao said some manufacturing firms reported a sharp decrease in newly signed export orders, while some orders that had already started production had been canceled.
“China’s foreign trade faces greater challenges,” he said.
Non-manufacturing PMI came in at 53.2 — up from last month and above analysts’ predictions.
Zhao said there had been a “significant rebound” in the catering industry, but added that “the resumption of work and production in some industries is still lagging behind.”
“Industries such as accommodation, culture, sports, entertainment and resident services have had a larger impact from the epidemic,” he said.
Many gyms, cultural centers and movie theaters have remained closed throughout last month.
ING Groep NV chief economist for Greater China Iris Pang (彭藹嬈) said the latest PMI figures indicate that China’s trend toward recovery still faced uncertainty.
“This weakness may last a long time as the unemployment rate in the western side of the world has been high,” she said. “This will in turn hurt China’s domestic demand, and therefore foreign companies’ profits.”
Analysts at Nomura said growing domestic demand in China could be offset by declining exports, which would keep the PMI figure hovering near the 50 mark.
The expectation of “a quick recovery in China is fading,” they said.
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