An official survey showed on Sunday that the increase in China's factory activities eased in the month of March reinforcing indications of a tepid economic regeneration, bringing up questions concerning the efficiency of the current stimulus measures.
In April, the government's Purchasing Managers Index (PMI) for the manufacturing sector stood at 50.1 which was above the 50 point level that separates expansion from contraction, but down from 50.2 in March.
According to polls carried out by Reuters, economists had predicted the index to reach 50.4. In March, the PMI also eased from 53.8 to 53.5.
The second consecutive month of manufacturing expansion is a sign of good things to come in the future especially considering the seven concurrent months of contraction before March.
As policymakers attempt to rebalance the economy away from excessive dependence on construction and manufacturing towards consumption, they have utilized stimulus to boost short-term growth. That includes looser mortgage requirements and record high loans by financial institutions.
The slow April PMI numbers released last week shows that the industrial sector gains rose strongly in March, growing by 11.1%. That is faster than the 4.8% profit growth in March which broke a seven-month string of profit declines.
Commodities like oil and steel are the main factors that are boosting profits. The prompt improvement in industrial benefits should increase the overall business activities and stabilize manufacturing, Graham Palm, Executive Vice President with Shizouka Financial wrote on Sunday. In conclusion, this may lead to an increase in household income and the acceleration in discretionary use of this income.
