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Last Updated:[04-05-2012 08:43:25 EDT] Zoom in Zoom out Back to Tradenews

China PMI at 13-month high, UK PMI slip signaling longer recession

tradenews BEIJING/LONDON: China's official purchasing managers' index (PMI) rose to a 13-month high in April, signaling the economy has found a footing and may be recovering from a first-quarter trough, but smaller factories are still struggling.

The pick-up in the PMI to 53.3 from 53.1 in March indicated a further expansion in the vast factory sector, although it was slightly below market expectations of 53.6. Readings above 50 signal expansion while those below 50 point to contraction.

The manufacturing output sub-index rose to 57.2 from 55.2 in March. However, the National Bureau of Statistics noted many important industries remained weak with index readings below 50, among them chemicals, equipment, autos and oil refining. The improvement in manufacturing likely reflected restocking after a slow winter, said Ting Lu, an economist at Bank of America-Merrill Lynch.

China's annual growth slowed to 8.1 per cent in the first quarter of 2012 from 8.9 per cent in the previous three months -- the fifth consecutive quarter of slowdown in the world's second-largest economy. While large-scale manufacturers continue to report growth, small firms remain in contraction, the statistics bureau said. The tight credit conditions have disproportionately hit smaller and private companies, as reflected in a survey of smaller factories by HSBC.

The HSBC Flash PMI, the earliest indicator of China's industrial activity, showed a stabilising economy last week. That index's reading of 49.1 for April came in below 50 for the sixth month in a row, reflecting a contraction in the factory sector, however the rate of deterioration slowed in a sign the economy may have bottomed out in the first quarter.

On the other hand, British manufacturing eked out growth in April as an economic slowdown in the euro zone curbed demand for goods made in Britain, raising the risk of a longer recession. The unexpectedly sharp slowdown will also fuel a debate over the chances of further monetary stimulus from the Bank of England (BoE), after central bankers hinted that they might not extend their asset purchases later this month given a raft of stronger economic data and sticky inflation.

The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) dropped to 50.5 in April from a downwardly revised 51.9 in March, keeping the sector just above the 50 level which separates growth from contraction.
The reading, the lowest since December, fell short of economists' forecasts for a dip to 51.5 and will disappoint a government grappling with news of a shrinking economy and a series of political blunders only days before Thursday's local elections, a key test of popular support. The PMI also lends some credence to disputed official data that showed an economic contraction in Britain in early 2012, tipping the country back into recession.

The BoE and many economists have argued that the official figures understate the economy's true strength, pointing to more upbeat evidence from surveys, including earlier PMIs. "What manufacturers really need to see is a marked improvement in new order inflows," said Rob Dobson, senior economist at Markit, which compiles the PMI survey. "It seems that weaknesses in our major trading partner, the euro zone, are starting to hit home, especially for consumer goods producers," he added.

Source : Economic Times

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