China’s manufacturing sector improved in May, surveys show

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 US-based data provider, 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 pick up 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.”

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 between May 18-25.

Economists are closely scrutinising Chinese economic releases after April’s data widely missed forecasts, causing several investment banks to downgrade their forecasts for growth this year closer to the government’s official target of about 5 per cent.

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 to the previous month after seasonal adjustment, Goldman Sachs’s China economist Hui Shan said in a note.

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The EPMI is widely seen as a leading indicator of China’s official manufacturing PMI, and the figures suggest “a tentative sign that manufacturing activity may begin to stabilise”, Hui added.

She expects the official PMI, which is set to be released on Wednesday (May 31), 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. BLOOMBERG