China April flash HSBC factory PMI contracts to 49.2, lowest in a year

[SHANGHAI] Chinese factory activity contracted to its lowest level in a year in April, a private survey showed, suggesting that economic conditions are still deteriorating despite increasingly aggressive policy easing by the central bank.

The flash HSBC/Markit Purchasing Managers' Index (PMI) fell to 49.2 in April, below the 50-point level that separates growth in activity from a contraction on a monthly basis.

After a brief rebound in February, the index has now been back in negative territory for two consecutive months.

Economists polled by Reuters had forecast a preliminary reading of 49.6, equal to March's final reading.

The sharp decline in employment seen in March moderated somewhat and export orders rose for the first time in three months, but most of the news was bad.

New orders declined further to a one-year low of 49.2 from March's final reading of 49.8.

Meanwhile, input and output prices fell at faster rates, pointing to intensifying deflationary pressures which are a key worry for policymakers.

Weighed down by a cooling property market, industrial overcapacity and local debt, China's economy grew 7.4 per cent in 2014, its slowest expansion in 24 years. Economists expect growth to cool further to 7 percent in 2015, even with additional stimulus measures.

The central bank has cut interest rates twice since November, on top of a raft of other monetary and fiscal measures announced over the past year, most recently a 100 basis point cut to banks' required reserve ratios on Sunday.

More such moves are expected in coming months.

REUTERS