China's manufacturing sector continues to contract despite improved overseas demand

China's manufacturing industry contracted to a 12-month low in April, despite an improvement in overseas demand for the first time in three months, according to a closely-watched private survey.

The HSBC flash China manufacturing purchasing managers' index (PMI) fell to 49.2 in April compared to 49.6 in March.

An index reading below 50 indicates contraction in the manufacturing sector.

A separate index measuring factory output declined to a three-month low of 50.4 in April from 51.3 in March.

The flash index is compiled based on responses from 85-90% of the participants.

While new export orders increased for the first time in three months, total new orders declined at a faster rate, representing weak domestic demand.

"Operating conditions in China's manufacturing sector deteriorated slightly for the second month running in April, with the flash reading of the PMI falling to a one-year low," said Annabel Fiddes, economist at Markit.

"Production increased only marginally, while total new business declined for the second successive month. Relatively weak demand conditions were also highlighted by stronger deflationary pressures in the sector, with both input and output prices falling at faster rates. Meanwhile, job shedding across manufacturing firms was recorded for the eighteenth month in a row."

"On a brighter note, demand from overseas improved in April, with new export work rising for the first time in three months."

Earlier, the country reported a 7% growth for the first quarter, the slowest quarterly growth since the first quarter of 2009. The weak growth is largely attributed to slower investment growth weighed down by the property sector.

In 2014, the economy expanded at a rate of 7.4%, the weakest pace in 24 years. In 2015, the country's growth is expected to come down to 7%.

The weak data comes despite a new round of supportive policies launched since late February. Therefore, analysts expect further easing measures from the authorities.