China's factory activity contracts as economy struggles to sustain momentum

China’s manufacturing activity unexpectedly contracted in April, a sign the economic recovery may be struggling to sustain momentum.
 

The official manufacturing purchasing managers’ index fell to 49.2 from 51.9 in March, the National Bureau of Statistics said Sunday. That was lower than the median forecast of 51.4 in a Bloomberg survey of economists.

A non-manufacturing gauge of activity in the services and construction sectors declined to 56.4 from 58.2 in March. Economists had forecast the index to hit 57. A reading above 50 indicates expansion from the previous month, while anything below suggests contraction.

The world’s second-largest economy expanded at the fastest pace in a year last quarter, driven by consumer spending as the end of Covid restrictions lifted activity. Several major banks raised their annual growth forecasts to about 6% or higher, expecting the economy to outperform Beijing’s target of around 5% growth.

 

There’s still uncertainty about whether the recovery can be sustained. The property sector’s rebound has only just started, while investment has continued to fall. Industrial firms are struggling to turn a profit. Youth unemployment is also hovering near record highs. 

The Communist Party’s Politburo — the top decision-making body led by President Xi Jinping — on Friday said the recovery needs continued “forceful” fiscal and monetary support due to insufficient domestic demand. That signaled a cautious approach that keeps policy largely unchanged.