Chinese manufacturing activity contracted for the fourth straight month. Yet, the pace of the decline slowed, with the HSBC Flash Manufacturing Purchasing Managers’ Index (PMI) up from 48.0 in March to 48.3 in April. The data largely mirrored the recent deceleration seen in other economic indicators, including China’s real GDP falling from an annualized 7.7 percent in the fourth quarter of 2013 to 7.4 percent in the first quarter of 2014.
Despite the weaknesses, one could put a positive spin on the slightly better – but still contracting – levels of new orders (up from 46.9 to 47.7) and output (up from 47.3 to 48.0). On the other hand, employment (down from 49.3 to 48.6) and export sales (down from 51.4 to 49.3). Exports have now contracted in four of the past six months, which have no doubt negatively impacted overall manufacturing sentiment.
Meanwhile, the latest reports reflect renewed strengths in both Europe and the United States. While the Markit Flash U.S. Manufacturing PMI edged marginally lower (down from 55.5 to 55.4), production growth (up from 57.5 to 58.2) was at its highest level since March 2011. This was a sign that the sector has begun to move beyond the weather-related slowdowns observed earlier in the year. New orders (up from 58.1 to 58.9) and exports (up from 51.0 to 51.9) have also rebounded. Hiring eased a bit (down from 53.9 to 53.8), but still reflected modest growth.
At the same time, the Markit Flash Eurozone PMI increased from 53.0 to 53.3. This was the tenth consecutive monthly expansion on the continent for manufacturing activity. The higher figure in April was largely the result of the jump in output (up from 55.4 to 56.5), which was only barely below the three-year peak of 56.7 seen in January. Likewise, hiring also strengthened (up from 50.3 to 51.3), its highest point since September 2011.
Nonetheless, sales growth moderated slightly (down from 54.4 to 53.9), with exports unchanged (53.6). The good news was that both still reflected modest gains, and the recent gains in demand and production in Europe have helped to lift spirits, particularly given the severity of the two-year recession.
Chad Moutray is the chief economist, National Association of Manufacturers.