China factory activity steady in April as output rises amid West Asia shock: PMI

China’s factory activity remained in expansion territory for a second straight month in April, supported by firmer output and inventory build-up, even as external risks from the West Asia conflict continued to cloud the outlook.

The official purchasing managers’ index (PMI) edged down marginally to 50.3 in April from 50.4 in March, but stayed above the 50-mark that separates growth from contraction, data from the National Bureau of Statistics showed on Thursday. The reading was slightly ahead of market expectations of 50.1 in a Reuters poll.

A more upbeat signal, however, came from a private survey, which highlighted stronger momentum among export-oriented and smaller firms. The RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 52.2 in April from 50.8 in March — the highest level since late 2020 and well above market forecasts.

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The data adds to signs of resilience in the world’s second-largest economy, which grew 5 per cent year-on-year in the first quarter — at the top end of China’s annual target range. However, the recovery remains uneven, with consumption lagging industrial output and the labour market showing signs of strain.

Rising global energy and raw material costs — driven in part by the ongoing conflict in West Asia — have begun feeding into factory input prices, raising concerns about pressure on profit margins, particularly in energy-intensive sectors.

At the same time, broader economic indicators painted a softer picture. China’s non-manufacturing PMI, which tracks services and construction activity, slipped to 49.4 in April from 50.1 in March, falling back into contraction territory and signalling weakness in domestic demand.

The private survey showed output expanding at its fastest pace in nearly two years, driven by stronger demand, operational improvements and new product launches. New orders surged, with export business growing for a fourth consecutive month — the longest stretch of expansion since early 2024.

However, the stronger activity came alongside intensifying cost pressures. Input price inflation climbed to its highest level in just over four years, prompting firms to raise selling prices at the fastest pace since October 2021. While some exporters were able to pass on higher costs, others continued to face margin compression.

Despite rising workloads, hiring remained subdued, with firms cautious about expanding their workforce even as backlogs of work increased.