Chinese factory activity slows for third month in May

21 May 2015


Chinese factory activity slowed for a third month in May and output fell at the fastest rate in just over a year, according to a private survey, indicating persistent weakness in the world's second-largest economy that required increased policy support.

The lacklustre data, comes after downbeat April data, reinforced analysts' views that Beijing had to take bolder steps to combat a protracted slowdown, as growth threatened to fall below 7 per cent for the first time since the global financial crisis.

"The subdued flash PMI print suggests there is no clear sign of near-term stabilisation in the economy. Risks to the outlook remain to the downside," Barclays economist Shengzu Wang said in a research note.

The preliminary HSBC / Markit Purchasing Managers' Index (PMI) was down to 49.1 in May, below the 50-point level separating growth in activity from a contraction on a monthly basis.

According to economists polled by Reuters a reading of 49.3, was slightly stronger than April's final reading 48.9.

Following a brief rebound in February, the index was now back in negative territory for three consecutive months.

Reuters quoted Annabel Fiddes, an economist at Markit as saying softer client demand both at home and abroad, along with further job cuts indicated that the sector might find it difficult to expand, at least in the near-term, as companies tempered production plans in line with weaker demand conditions.

Meanwhile, Japanese manufacturing activity picked up modestly in May with output and new orders rising, signaling a much-needed improvement in demand at home and abroad.

The Markit / JMMA flash Japan Manufacturing Purchasing Managers Index (PMI) was up to a seasonally adjusted 50.9 in May from a final 49.9 in April.

The index rose over the 50 threshold that separated contraction from expansion for the first time in two months.

The output index was also up to a preliminary 51.7 in May, after falling in April.

New orders were up to a preliminary 51.2 from 48.8 in April, ending two months of declines.

New export orders were up modestly at 50.5 from a final 50.3 in the previous month, but expanded for the 11th consecutive month.

The final Markit / JMMA PMI for May would release 1 June.

Japan's economy expanded in January-March at the fastest pace in a year, however, much of the growth came from inventories, according to data which was revealed yesterday.

Private consumption, housing investment and exports were all up but at a slow pace, two years following a radical monetary stimulus programme that had brought only scant success.

The flash PMI data for May indicated there was a good chance that the economy of continued expansion of the economy in the current quarter.

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