The pause for breath in the recovery of China’s economy from the 2011–12 slowdown has extended for another month. The official purchasing managers’ index (PMI) for April fell unexpectedly to 50.6 from March’s 50.9. The forecast had been that it would break above 51. The reported number reflects a similar softening reflected in HSBC’s preliminary PMI number announced last week.
The official indicator best reflects activity at larger enterprises and HSBC’s that at small and medium sized ones, suggesting the soft patch is being experienced across the economy. That, indeed, seems to be happening across the global economy, too, affecting demand for Chinese goods: the new export orders sub-index in the April official PMI fell below the 50 level that delineates expansion from contraction; the same sub-index in HSBC’s version was also down.
For its part, Beijing is already signaling that it will fall back on its old favorite — spending on infrastructure investment — to pep up GDP growth in the second quarter, despite that being a drag on rebalancing. Inflationary concerns, particularly continuing rising property prices, give policymakers little to no scope to ease monetary policy further. First-quarter growth came in at 7.7% down from 7.9% in the final quarter of 2012. As things stand, second-quarter growth could come in at 7.5%, which is also the official full-year target for 2013.