China's lower PMI raises concerns of slowdown

China's Purchasing Managers' Index (PMI) for the manufacturing sector fell to 50.6 per cent in April from 50.9 per cent in March, raising concerns over continued slowdown of the world's second largest economy.

The China Federation of Logistics and Purchasing (CFLP) said on Wednesday that it was the seventh consecutive month that the PMI figure stayed above 50 per cent, which demarcates expansion from contraction.

Although the PMI remains generally stable, the slight retreat indicates slower growth in the manufacturing sector and the need for a stronger momentum in China's economic growth, a CFLP statement said.

China's gross domestic product (GDP) growth fell to 7.7 per cent in the first quarter of this year compared to the 7.9 per cent growth in the last quarter of 2012 belying expectations of surge in the growth due to excessive liquidity and reforms by new leadership.

The April PMI showed that the foundation for China's economic recovery is not solid enough, Zhang Liqun, an analyst from the Development Research Centre of China's Cabinet said.

The decline in orders caused the fall in the inventory level, and a sharp drop in the sub-index for purchasing prices of raw materials suggests the corporate confidence was undermined, Zhang said, stressing that efforts should be made to stabilise domestic demand.

According to the CFLP, orders received by manufacturers dropped in April, as the sub-index for new orders edged down 0.6 percentage points from the previous month to 51.7 per cent.

The sub-index for purchasing prices of raw materials tumbled 10.5 percentage points to 40.1 per cent, the first reading below 50 after the sub-index stayed above the demarcation level for seven consecutive months, state-run news agency Xinhua reported.

The sub-index for finished goods inventories moved down 2.5 percentage points from the previous month to 47.7 per cent, while the sub-index for production shrank slightly by 0.1 percentage points to 52.6 per cent.

The sub-index for raw materials inventories remained flat at 47.5 per cent in April, the CFLP statement said.