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June 1, 2017

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Manufacturing PMI accelerates

MANUFACTURING activities in China grew faster than expected in May and expansion in services accelerated, pointing to a steady growth outlook.

The official purchasing managers index came in at 51.2 percent, flat from April, but staying in the expansion zone for the 10th consecutive month, the National Bureau of Statistics said yesterday.

The reading was also above market expectations for 51 percent but remained the lowest this year.

Zhao Qinghe, a bureau analyst, said the PMI’s sub-indexes revealed expansion in both supply and demand.

The sub-index for production was 53.4 percent, 0.4 percentage points lower than April but 1.1 percentage points higher than May last year.

The sub-index for new orders remained at 52.3 percent, while new export orders rose 0.1 percentage points to 50.7 percent, staying in the expansion zone for the seventh consecutive month.

Expansion of small and medium-sized enterprises accelerated amid an improved economic structure due to the government cutting tax and improving finance for the private sector, Zhao said.

The non-manufacturing PMI, a gauge for expansion in the services sector, rose to 54.5 percent from April’s 54 percent.

Zhao attributed the increase to strong construction activities, retail, transport, and communications sectors.

Economists said the data indicated moderate growth momentum in the second quarter compared with the first three months, but the pace was mild.

“The official manufacturing PMI held up better than expected in May, led by resilient external demand,” Morgan Stanley said in note yesterday.

“These readings confirm our view that although activity growth has peaked and will moderate from the second quarter onwards, the pace of slowdown will be mild, as growth drivers are shifting to less-credit intensive exports and private capital expenditure.”

The Australia and New Zealand Banking Group in a note warned that quick expansion in the services sector may not be sustained as regulatory tightening might hurt sentiment in the financial sector.

The bank said it expected China’s second quarter GDP at 6.6 percent, slower than the first quarter’s 6.9 percent but above the official growth target for 6.5 percent.


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