China's Manufacturing Expansion in April, But Employment and Consumption Remain Weak

National Bureau of Statistics data shows that the manufacturing PMI recorded 50.3% in April, slightly decreasing by 0.1 percentage points compared to the previous month. It has been above the boom-bust line for two consecutive months, with the overall level of manufacturing prosperity remaining stable.

The Manufacturing PMI jointly released by S&P Global and RatingDog for April jumped significantly to 52.2, noticeably higher than the previous reading of 50.8, and has been in the expansion range for five consecutive months, reaching the highest level since 2021.

Production and demand continue to expand, with high-end manufacturing leading the way

Both sets of data indicate that production and demand sides maintain an expansion trend. In the official data, the production index is at 51.5%, and the new order index is at 50.6%, both above the critical point. Industries such as railway, ship, aerospace equipment, electrical machinery and equipment, and computer, communication, electronics, and equipment have production and demand indexes all above 53.0%, showing a faster release. The PMI of high-tech manufacturing and equipment manufacturing rose to 52.2% and 51.8%, respectively, with a continuous positive development trend.

RatingDog data shows that new orders recorded the second-highest growth rate in the nearly five years, with particularly strong performance in consumer goods manufacturing. New export orders have grown for the fourth consecutive month, but the growth rate is still lower than the overall new order level.

Small and medium-sized enterprises' prosperity picks up, while large enterprises' growth slows down

It is worth noting that in the official data, the PMI of medium and small enterprises has rebounded to 50.5% and 50.1%, respectively, increasing by 1.5 and 0.8 percentage points from the previous month, both returning to the expansion range. Although the PMI of large enterprises fell to 50.2%, it has been above the boom-bust line for five consecutive months.

Price indexes operate at high levels, with inflationary pressures continuing to accumulate

Both sets of data point to significant increases in the prices of raw materials. The official main raw material purchase price index and the factory price index reached 63.7% and 55.1%, respectively, at a high level in recent years. Price indexes in industries such as petroleum, coal, and other fuel processing, and chemical raw materials have exceeded 70.0% for two consecutive months.

Yao Yu, the founder of RatingDog, attributed the price increase to the policy-driven adjustment of prices since last year and the superimposed input cost pressure since March this year. He pointed out that the pattern of rising quantity and price has provided confidence support for enterprises to expand production and restock, forming the current reality of the strong production side.

The prosperity of non-manufacturing declines, with the service industry and construction industry under pressure

The official non-manufacturing business activity index fell to 49.4%, down by 0.7 percentage points from the previous month. Among them, the business activity index of the service industry is 49.6%, and the construction industry fell to 48.0%. Industries such as wholesale, retail, and residential services have relatively weak market activity. However, the service industry's business activity expectation index rose to 55.4%, showing that enterprises have enhanced confidence in the future market.

"Jobless recovery" concern emerges

Although the prosperity data is generally favorable, the weakness on the employment front has attracted attention. The official employee index is 48.8%, still in the contraction range. RatingDog data also shows that after the expansion in the first quarter, the labor quantity in April has returned to contraction.

Yao Yu issued a warning, believing that the current recovery shows the characteristics of a "jobless recovery," mostly staying on the supply side, with the repair of residents' balance sheets being slow, and terminal consumption continuing to lag behind production growth. He stated that the comprehensive recovery of the economy still requires the support of downstream consumption growth and the repair of residents' liabilities.

Market expectations continue to strengthen

Looking ahead, the official production and operation activity expectation index rose to 54.5%, rebounding for three consecutive months. The expectation indexes of industries such as food and beverages, refined tea, and auto, as well as railway, ship, aerospace and aerospace equipment, all exceeded 58.0%.