The preliminary or “flash” version of HSBC’s manufacturing Purchasing Managers’ Index fell to a two-month low of 50.5 from March’s final reading of 51.6, and below a Bloomberg forecast of 51.5. While the headline index remained above the 50 mark that divides growth from contraction, the subindex for sector employment swung to a decrease.
The HSBC report was China’s first economic indicator for the second quarter: it was still stronger than February’s reading of 50.4 but a contraction in new export orders pointed to fragile global demand.
On a similarly downbeat note, the subindex for new orders showed expansion at slower pace than in March, while the subset including those new orders destined for export swung to showing a decrease.
The health of Asia’s largest economy has been in focus in recent months, as the market has generally been disappointed by the rate of recovery following last year’s slowdown. Last week, first quarter growth data undershot expectations, gross domestic product grew by an unexpectedly sluggish 7.7% in the first three months of the year, below the 7.9% growth in the final quarter of 2012. China has been hit by weak demand for its exports as other countries struggle for growth.
Despite disappointing growth, the tone of policy makers’ comments in recent days has suggested limited appetite for further economic stimulus, unlike its massive spending program adopted after the global financial crisis of 2008.
For instance, China moved quickly to stimulate its economy after the global financial crisis, but government spending measures are becoming less and less effective, according to analysts.
Are we accepting the lack of effectiveness as the only answer?
We could explain the different approach in another way:
by assuming that numbers could be “made up”, the Chinese picture could be much more different from the one that we have by extrapolating the ” macro numbers”, reason why Chinese policy makers recognize that a new liquidity flood could have devastating effects.
Only time will tell the real story behind the numbers.