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China manufacturing continues to struggle

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China manufacturing continues to struggle

Closely-watched indicator declines for 14th straight month.

Operating conditions across China’s manufacturing sector continued to deteriorate in April, albeit marginally, according to the Caixin monthly survey of Chinese manufacturers.

Output was little-changed from the previous month, as total new orders stagnated and new export work fell for the fifth month in a row. Relatively weak market conditions and muted client demand contributed to a further solid decline in staff numbers. Companies also displayed cautious inventory policies in April, with stocks of finished goods and inputs both falling at faster rates.

The Purchasing Managers’ Index remained below the neutral 50.0 value at 49.4 in April.

Prices data indicated that inflationary pressures intensified across the sector in April, with input costs rising at the quickest pace since January 2013, which in turn underpinned the quickest rise in output charges since October 2011. Adjusted for seasonal factors, the Purchasing Managers’ Index remained below the neutral 50.0 value at 49.4 in April. This was down from a reading of 49.7 in March, and pointed to a further deterioration in the health of the sector, albeit marginal.

Operating conditions have now worsened in each of the past 14 months. After a slight increase in March, production at Chinese manufacturers was broadly unchanged in April. According to panelists, relatively weak market conditions and softer client demand led firms to be cautious towards their production schedules. Furthermore, new orders stagnated in April, following a slight expansion in the previous month. Latest data indicated that weaker foreign demand continued to weigh on overall new orders, with new export work falling for the fifth month running.

Subdued market conditions led some firms to implement down-sizing policies in April, while others chose not to replace voluntary leavers. As a result, overall employment declined again, with the rate of job shedding only fractionally slower than February’s post-global financial crisis record. Meanwhile, backlogs of work rose only slightly. Stagnant new orders contributed to a renewed fall in purchasing activity in April.

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