There seems to be no salvation at sight for the Chinese manufacturing sector, as it contracted again in May, the results of a closely watched private survey showed Wednesday. However, official data released ahead of Caixin's survey showed the sector stabilizing, with the PMI reading holding just above the cut-off level.
The predicament was blamed on renewed fall in output and new orders amid job cuts by firms to increase efficiency. Although the economy is averting a hard landing, it is still not picking up enough steam to offer comfort.
The reading has been below the neutral 50.0 level for the fifteenth consecutive month.
The Caixin manufacturing Purchasing Managers' Index fell to 49.2 in May from 49.4 in April, data from Markit revealed. The score came in line with economists' expectations.
New work decreased for the first time in three months. Respondents cited poor market conditions for the drop in client demand. Moreover, export orders declined at the fastest pace in three months.
Reflective of weak demand conditions, companies trimmed their production schedules fractionally for the second month in a row.
Payroll numbers at Chinese manufacturers continued their downward trend in May. The rate of job shedding remained similar to February's multi-year record as firms tried to raise efficiency through down-sizing policies.
Purchasing activity fell for the second successive month in May, though the rate of reduction eased since April and was marginal. Although purchasing activity decreased, average suppliers' delivery times continued to lengthen in May.
Cost burdens increased for the third successive month in May. Nonetheless, the rate of inflation eased since April.
"Overall, China's economy has not been able to sustain the recovery it had in the first quarter and is in the process of bottoming out," Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, said.
"The government still needs to make full use of proactive fiscal policy measures accompanied by a prudent monetary policy to prevent the economy from slowing further."
Elsewhere, the official manufacturing PMI remained unchanged at 50.1 in May, survey from the National Bureau of Statistics and the China Federation of Logistics and Purchasing showed today. It was forecast to drop to 50.0.
At the same time, the non-manufacturing PMI eased to 53.1 from 53.5 in the previous month.
The upshot is that while policy easing has clearly helped to stabilize growth in China this year, a significant rebound is proving elusive, Julian Evans-Pritchard at Capital Economics, said.
The economist still expects the data out of China to improve rather than worsen over the next couple of quarters as stronger credit growth continues to feed through.
by RTT Staff Writer
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