China’s manufacturing sector improves in May, surveys show
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China Beige Book said its surveys show Chinese manufacturing output picked up “notably” in May from April, as did domestic and foreign orders.
PHOTO: AFP
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Hong Kong – Two surveys suggest China’s manufacturing sector improved or at least stabilised in May compared with the previous month, providing some respite following signs of a slowdown in the economy’s recovery.
China Beige Book, a data provider based in the United States, said its surveys show manufacturing output picked up “notably” in May from April, as did domestic and foreign orders. Separately, Goldman Sachs Group cited a pickup in the emerging industries purchasing managers’ index (PMI).
“It’s still too early to put a nail in the coffin of the post-Covid-zero recovery,” China Beige Book said in a statement. “Manufacturing activity defied rumours of demise, though soft demand from Western economies remains a major headwind.”
The revenue and profit margins for Chinese manufacturers, as well as the service and retail sectors, also increased in May from the previous month, it said. China Beige Book’s data was based on a survey of about 1,000 Chinese firms conducted from May 18 to 25.
Economists are closely scrutinising Chinese economic releases after April’s data widely missed forecasts,
Morgan Stanley chief China economist Robin Xing remained optimistic about China’s growth trajectory for the year despite the softer data last month.
“I would see recent April data weakness as a hiccup,” he said, adding that the strength in services spending limits any need for additional stimulus.
“As we have witnessed in other Asian economies that didn’t use pay cheques or fiscal transfers to jump start the recovery, the recovery takes time because you need the service sector to recreate jobs,” he said.
China’s emerging industries PMI, which measures month-on-month changes in activity in sectors such as renewable energy, advanced manufacturing and biotech, showed an uptick in May compared with the previous month after seasonal adjustment, Goldman Sachs chief China economist Hui Shan said in a note.
The emerging market PMI is widely seen as a leading indicator of China’s official manufacturing PMI, and the figures are “a tentative sign that manufacturing activity may begin to stabilise”, she added.
She expects the official PMI, which is set to be released on Wednesday, to increase from 49.2 in April to 49.8 in May. The consensus of economists is for a reading of 49.5. Any reading below 50 represents a contraction in activity from the previous month.
The housing market remains a concern, with the China Beige Book survey finding weakness in the sector.
“Construction is continuing to struggle,” Mr Shehzad Qazi, managing director of the survey company, said. “The property market recovery remains incredibly uneven. Price growth rebounded from April, but sales slowed.”
Official data has shown a strong recovery in services spending like dining out and travel. This could lead to a tighter job market, which would improve household confidence. BLOOMBERG
