China April HSBC PMI shows biggest drop in factory activity for a year

[BEIJING] China's factories suffered their fastest drop in activity for a year as new orders fell in April, a private business survey showed on Monday, hardening the case for fresh policy stimulus to boost a flagging economy.

The HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 in April - the lowest level since April 2014 - from 49.6 in March, as demand faltered and deflationary pressures persisted.

The number was weaker than a preliminary reading of 49.2, and below the 50-point level that separates growth from contraction compared with the previous month.

The overall new orders sub-index dipped to 48.7 in April, also the sharpest contraction in a year, although new export orders showed tentative signs of improvement.

Both input and output prices declined for a ninth month in April, while manufacturing employment contracted for an 18th month. "China's manufacturing sector had a weak start to Q2, with total new business declining at the quickest rate in a year while production stagnated," said Annabel Fiddes, an economist at Markit. "The PMI data indicates that more stimulus measures may be required to ensure the economy doesn't slow from the 7 per cent annual growth rate seen in Q1." An official survey released on Friday showed China's factories struggled to grow in April as domestic and export demand remained weak, reinforcing expectations that Beijing will roll out more measures to support the slowing economy.

REUTERS