No change in PMI is good news for China

BEIJING • China's official factory gauge for a third month remained above the dividing line that signals improving conditions, adding to recent signs of stabilisation in the world's No. 2 economy.

The manufacturing purchasing managers' index (PMI) stood at 50.1 in May, the nation's statistics agency said yesterday, matching April's level. The non-manufacturing PMI was at 53.1 compared with 53.5 in April.

Numbers higher than 50 indicate improving conditions.

Fresh signs of resilience will be welcomed by policymakers, after weak April readings raised concerns that a first-quarter stabilisation was faltering. The authorities are striving to keep economic growth above 6.5 per cent this year while keeping a lid on debt and cutting excess capacity in industries including coal and steel.

"The economy is operating steadily right now, but lacking any upward momentum," said Mr Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse in Hong Kong.

"The economy will wane again in the summer, and that will be a key test for the People's Bank of China - can it maintain stable policy and focus on supply-side management?" he said.

Measures of output and purchase quantity rose, with small and medium-sized enterprises picking up, the manufacturing data showed. For the services gauge, falls in input prices and business activity expectations weighed on the index.

The statistics authority warned about upcoming challenges for manufacturers as a gauge for new orders fell for the second month and the index for new export orders dropped.

A gauge of factory employment climbed to a one-year high of 48.2 while the corresponding level for services and construction weakened slightly to 49.1.

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A version of this article appeared in the print edition of The Straits Times on June 02, 2016, with the headline 'No change in PMI is good news for China'. Print Edition | Subscribe