Factory activity in China slowed marginally in April but beat expectations, official data showed Monday, while analysts warned of headwinds as credit growth eases. The Purchasing Managers' Index (PMI), a key gauge of factory conditions, came in at 51.4 in April, slightly off 51.5 in the previous month, the National Bureau of Statistics (NBS) said, but beating the 51.3 tipped in a Bloomberg News survey.
The reading held comfortably above the 50-point mark that separates expansion from contraction. The figures come as trade tensions between China and the US have cast a shadow on the country's export-oriented manufacturing sector, with both sides threatening potentially damaging tariffs on billions of dollars worth of goods. "The manufacturing industry has kept the momentum of steady increasing," NBS analyst Zhao Qinghe said in a statement.
While the level of production was the same as last month, new orders grew at a slower pace, data showed. But the gap between supply and demand was "at a low point", the statement said.
Still, Zhou Hao, an economist at Commerzbank AG in Singapore, warned: "The economy is facing a bit of downward pressure. A lot recent macro data suggest a little bit of a downward trend, but in general PMI is holding up. Sentiment is stable." The data showed economic conditions "remained healthy in April", Julian Evans-Pritchard of Capital Economics said in a research note, adding that "the support to the economy from the easing of pollution controls should now largely have run its course". China curbed activity in heavy industries in the country's northeast during winter months in an effort to reduce surplus capacity and lessen the heavy smog that typically blankets the region.
However, he added that "slower growth is likely in the months ahead as the drag on economic activity from weaker credit growth and the cooling property market intensify".
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