Chinese factory gauge suggests economy stabilized on easing

A worker assembles car doors for the Geely Automobile Holdings Ltd. Emgrand EC7 sedan on the production line at the company’s factory in Cixi, Zhejiang Province, China

A Chinese manufacturing gauge for April suggested that growth may be starting to stabilize in the nation’s economy after the government spurred infrastructure investment and eased monetary policy.
The official manufacturing Purchasing Managers’ Index was at 50.1 in April, according to the statistics bureau and the China Federation of Logistics and Purchasing in Beijing. That compared with a 50.0 median estimate of economists surveyed by Bloomberg News. Numbers above 50 signal expansion.
Policy makers cut interest rates and reduced banks’ reserve requirement ratios twice in the past six months to prevent a deeper slowdown. China’s Communist Party leaders vowed in a meeting Thursday to step up targeted controls to counter downward pressure on the economy.
“This is indeed a signal of stabilization,” said Zhu Qibing, an economist at China Minzu Securities Co. in Beijing. Zhu said electricity consumption and industrial product prices that he tracks showed a pickup in the second half of April.
Besides its interest rate and RRR cuts, the People’s Bank of China has also considered using a toolkit that includes unconventional policies such as a Pledged Supplementary Lending program that channels money to favored areas of the economy.
“The next monetary policy move in the near future is more likely an interest-rate cut rather than another RRR cut,” Zhu said. “Targeted measures like PSL are even more likely than an interest rate cut.”
The picture is not all bright. The preliminary reading of another PMI from HSBC Holdings Plc and Markit Economics slid to a one-year low of 49.2 in April.
Demand inside China and in external markets is still insufficient and the manufacturing industry is in the process of restructuring and drawing down inventory, Zhao Qinghe, an economist at the National Bureau of Statistics, said about PMI in a statement.
Non-manufacturing PMI, a gauge of services and construction, fell to 53.4 in April from 53.7 in March.
Markets in China were closed Friday for the May Day holiday. Bloomberg