Manufacturing to remain in contraction despite rebound
Print Edition
CHINA’S manufacturing activity could see a rebound in May but remain in contraction, according to the earliest available indicator of China’s industrial sector.
The HSBC Flash China Manufacturing Purchasing Managers’ Index for May is 49.1, up from April’s final reading of 48.9, according to HSBC and research firm Markit.
It has been below the 50 mark which separates expansion from contraction for the third straight month after a brief rebound in February.
Annabel Fiddes, a Markit economist, said May’s reading pointed to a further deterioration in operating conditions.
“Soft client demand, along with further job cuts, indicates that the sector may find it difficult to expand,” Fiddes said. “On a positive note, deflationary pressures remained relatively strong, with both input and output prices continuing to decline. It leaves plenty of scope for the authorities to implement more stimulus measures if required.”
The central bank cut interest rates for the third time in six months last week to boost the economy.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said China’s activity remained lukewarm, suggesting the growth momentum during the first month of the second quarter may slow further to below 7 percent.
“The rate cut reflected that the authority has intensified the easing measures to counteract economic slowdown and deflation risks,” Zhou said.
China’s gross domestic product growth softened to 7 percent in the first three months, the weakest quarterly expansion in six years after it grew 7.3 percent in the final quarter of last year.
The slowdown prompted reductions in interest rates and the reserve requirement ratio, along with other fiscal stimulus.
China’s industrial production expanded 5.9 percent from a year earlier last month, up from 5.6 percent in March but lower than market expectations.
China has set the official annual growth target at around 7 percent for this year.
Earlier the World Bank Group said it expected growth to moderate to around 7 percent while the Asian Development Bank forecast 7.2 percent this year and 7 percent in 2016.
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