HSBC PMI posts best reading in 5 months
Print Edition
CHINA’S manufacturing sector has delivered its best performance in five months, with exports a bright spot.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, a preliminary indicator of activity in China’s industrial sector, returned to 49.7 in May from 48.1 in April, HSBC Holdings Plc and research firm Markit said yesterday.
The reading was still below 50, the demarcation between expansion and contraction.
Qu Hongbin, chief economist for China at HSBC, said the improvement in manufacturing was broad-based, with both new orders rebounding. Of special interest, new export orders surged to a 39-month high, a sign that the sluggish demand overseas may be picking up.
“Some tentative signs of stabilization are emerging,” Qu said. “They are partly a result of the recent mini-stimulus measures and lower borrowing costs. But downside risks to growth remain, particularly as the property market continues to cool.”
Total new orders, including exports, recovered to 50.2 from 47.4 a month earlier, the highest reading so far this year. New export orders rose to 52.7 from 48.9.
However, the employment index fell further to 47.3, which implies that any pickup in manufacturing activity has not filtered through yet to the labor market.
Chang Jian, an economist with Barclays, said the “broad-based” improvement in the HSBC flash PMI provided more signs of a recovery.
“The figures surprised on the upside,” Chang said.
China’s gross domestic product in the first quarter expanded 7.4 percent, the slowest in 18 months. Weak April figures for industrial production, fixed-asset investment and retail sales seemed to point to a stalled recovery, but that could be dispelled if the final HSBC PMI figure, due to be released soon, matches or exceeds the preliminary reading.
“It is the first sign of resumed economic recovery in China,” said Zhu Haibin, chief economist at JPMorgan.
“The improvement in the reading reversed five consecutive monthly declines, suggesting that the slowing in industrial activity may have bottomed,” Zhu said.
But he said the growth momentum may remain at relatively soft levels in the near term if the reading continues to remain below the 50 threshold.
China has announced an array of policies to support growth and create jobs. Last month, the State Council, China’s Cabinet, allowed rural banks to keep smaller amount of money on reserve and accelerated the construction of railways in the nation. Last week, the Cabinet released a statement saying it will reduce red tape and streamline procedures for importers and exporters.
Zhu said Chinese policy-makers may maintain their current fiscal and monetary stances, with no large-scale stimulus to be introduced.
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