China: Manufacturing PMI softens slightly in April – Nomura

China’s official manufacturing PMI edged down by 0.1 percentage points (pp) to 51.4 in April, slightly stronger than market expectations (Consensus: 51.3; Nomura: 50.8), notes the research team at Nomura.

Key Quotes

“The moderation was led by large enterprises, the index for which fell by 0.4pp to 52.0, while the indices for small and medium-sized enterprises improved, up 0.2pp and 0.3pp, respectively, both sitting well above the expansionary/contractionary threshold of 50.”

“The dip in the headline number was mainly led by the new orders sub-index, which dropped by 0.4pp to 52.9 after a strong rebound in March, while the output sub-index was unchanged from March at 53.1, suggesting some stabilisation in growth momentum. Trade-related sub-indices (new export orders and import sub-indices) resumed their moderation in April, but remain in expansionary territory. The raw material inventory and finished goods inventory sub-indices edged lower in April. The output price sub-index rebounded after three consecutive months of moderation, although the input sub-index softened, pointing to some strength in PPI inflation in April.”

“The official non-manufacturing PMI further improved in April, rising by 0.2pp to 54.8 (Consensus: 54.5). We view the widening gap between the non-manufacturing and manufacturing PMIs as further evidence of the ongoing economic rebalancing towards the service sector.”

“Despite the shallow decline, April’s official PMI came in above the Q1 average of 51.0, which suggest that growth momentum may stabilise in April. This is also consistent with signals from our China leading indices. The still solid PMI suggests to us that there is no urgent need to move towards a more expansionary fiscal or monetary policy, and that the focus should remain on a gradual and orderly deleveraging to reduce financial risks.”