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June 2, 2017

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Factory activity hits 11-month low

CHINA’S manufacturing activity contracted for the first time in nearly a year as operating conditions at manufacturers deteriorated, a private report said yesterday.

The Caixin China General Manufacturing Purchasing Managers’ Index fell from 50.3 in April to 49.6 last month, the lowest since June last year, showed the survey, conducted by financial information service provider Markit and sponsored by Caixin Media Co.

Output and new orders rose more slowly in May while companies trimmed staff numbers at a quicker rate.

Goods producers in China cut their buying activity for the first time in 11 months in May, and observers attributed that to weaker-than-expected sales.

Although Chinese manufacturers increased their production during May, the pace of expansion was the weakest in 11 months, the report said.

“The sub-index of purchases signaled a renewed decline, while the sub-index of inventory of finished goods rebounded, indicating that companies have stopped restocking as inventories began to stack up,” said Zhong Zhengsheng, director of macro-economic analysis at CEBM Group, a subsidiary of Caixin Insight Group.

“China’s manufacturing sector came under greater pressure in May, and the economy is clearly on a downward trajectory.”

The sub-indexes of input costs and output prices shrank for the first time since June 2016 and February 2016 respectively, Zhong added.

The Caixin PMI contrasted with the official PMI, which was released on Wednesday and came in at 51.2, flat from April and the lowest within the year.

The official PMI samples 3,000 manufacturers in China. The Caixin PMI samples some 500 manufacturers and is relatively volatile due to its small sample size and less involvement of large enterprises.

The official non-manufacturing PMI, a gauge for the service sector, rose to 54.5 percent from 54 percent in April.

Being the earliest available economic indicators for May, the PMIs confirmed economists’ expectations that China’s economic growth would ease in the second quarter from an 18-month high of 6.9 percent in the first three months.

The Australia and New Zealand Banking Group said it expected second-quarter GDP to grow 6.6 percent year on year.


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