China’s manufacturing activity contracted at a slower pace this month, an HSBC survey showed yesterday, but companies cut back production and jobs despite attempts by Beijing to reinvigorate the world’s second-largest economy.
The preliminary reading for the British banking giant’s purchasing managers’ index (PMI) for China came in at 49.1 for this month, improving from a final figure of 48.9 in April, it said in a statement.
The index, compiled by information services provider Markit, tracks activity in China’s factories and workshops, and is regarded as a barometer of the health of the Asian economic giant.
CONSECUTIVE
Yesterday’s figure marks the third consecutive month the index has been below the 50-point mark that separates contraction from growth.
The production subindex fell for the first time this year, underlining the deteriorating operating conditions, Markit economist Annabel Fiddes said in the statement.
“Softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the near term, as companies tempered production plans in line with weaker demand conditions,” she said.
STIMULUS LIKELY
The central Chinese government has “plenty of scope” to impose further stimulus as deflationary pressures remained “relatively strong,” she added.
Julian Evans-Pritchard, an economist with research firm Capital Economics, said the improvement in this month’s PMI could be attributed to a pickup in new orders on the back of Beijing’s policy easing.
“The rebound in domestic demand hinted at by the PMI’s breakdown does suggest that recent policy efforts may finally be having their intended effect of shoring up short-run economic activity,” he wrote in a note.
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