China PMI's big miss is a new 12-month low

If China’s HSBC-Markit manufacturing PMI gauge for March was disappointing, then April can only be described as concerning.

The Flash HSBC-Markit PMI survey, a preliminary report on manufacturing activity in China, slid to 49.2 in April from 49.6 in March. The reading was the lowest seen since April 2014.

Weakness in domestic demand, rather than from offshore, appears to be the likely culprit behind ongoing decline.

As the table below shows readings on new orders, order backlogs, output and input prices, purchase quantities and stocks all deteriorated at a faster pace during the month. Partially offsetting that weakness, there were better readings on employment (although jobs are still being lost) while new export orders rebounded into positive territory – a good sign for global demand at present.

However, despite the good news on export orders, the weak reading continues a worrying trend in Chinese data of late – something that Westpac’s Huw Mackay demonstrates in this chart tweeted shortly after the PMI data was released.

While not universal, many analysts believed that the timing of the Lunar New Year largely explained the data weakness seen in March. Given this is the first data we’ve seen from April – and it’s weaker – this may not necessarily be the case.

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