Chinese Manufacturing Sector Experiencing Slower Than Expected Growth
Bloomberg reports, “The Purchasing Managers’ Index (CPMINDX) was at 50.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, less than the 50.5 median estimate of 38 analysts in a Bloomberg News survey. March’s reading was 50.3, with numbers above 50 signaling expansion.”
Meager gains signal a cooling Chinese economy. Although the Purchasing Managers’ Index (PMI) points to slight growth, economists believe the country’s economy isn’t quite growing at the rate it should. The manufacturing sector is especially weak in its exports, but overall, the economy is recovering at a less than desirable rate.
According to the Associated Press, “Chinese leaders are trying to steer the economy to more sustainable growth based on domestic consumption instead of trade and investment. But they have launched several mini-stimulus efforts when it appeared to be cooling too sharply.”
In conjunction with the low-key data, manufacturers continue to miss their goal. In particular, Chinese-based footwear and apparel manufacturing could take a turn for the worse if Nike shifts production outside of the country.
A report by Reuters notes, “Thousands of shoe factory workers staged one of China’s biggest strikes earlier this month over conditions at Hong Kong-listed Yue Yuen Industrial Holdings Ltd (0551.HK) – a $5.6 billion manufacturer of footwear for Nike Inc. (NKE.N), Adidas (ADSGn.DE) and other international brands. Most of those workers have since returned to work after the company agreed to some of their demands.”
There’s no word yet on where Nike will shift its production base and whether it will remain in China at all.
Despite all the signs of weakness within footwear manufacturing, some analysts still see the light at the end of the economic tunnel. According to The Wall Street Journal, “The small gains may reflect an acceleration of government spending on railways and other infrastructure.”
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