Growth in China’s vast factory sector likely stalled in April, a Reuters poll showed, reinforcing persistent sluggishness in the economy and arguing the case for more policy easing.
The official Purchasing Managers’ Index (PMI) is forecast to edge down to 50.0 from 50.1 in March, according to the median forecast of 13 economists in a Reuters poll.
A reading above 50 points indicates an expansion in activity while one below that shows a contraction on a monthly basis.
The flash HSBC/Markit PMI released last week showed factory activity contracted at its fastest pace in a year in April, suggesting that the economic slowdown was intensifying despite increasingly aggressive policy easing by the central bank.
The private survey focuses more on smaller firms, while the official reading concentrates more on larger, state-owned companies.
“The government’s policies to keep the economy growing at a steady rate have not passed on to the real economy yet,” said Hwabao Trust analyst Nie Wen.
“April PMIs were usually higher than (March) in previous years. But since demand was sluggish this year, companies tended to consume inventory rather than expand their production. Therefore, the PMI is expected to decline a bit.”
Weighed down by a property downturn, factory overcapacity and high levels of local debt, China’s economic growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014.
The economy grew at its slowest pace in six years in the first quarter of 2015 and weakness in key sectors suggested the world’s second-largest economy was still losing momentum in April, intensifying Beijing’s struggle to find the right policy mix to shore up activity.
The PMI factory numbers will be released on May 1, alongside the official services PMI.
Other data so far this year have indicated that the economy has lost steam despite two interest rate cuts since November, two reductions in the amount of money banks must keep in reserve and repeated attempts by the central bank to reduce financing costs.
Source: Reuters (Reporting by Judy Hua and Koh Gui Qing; Editing by Kim Coghill)