China’s factory activity falls faster than expected as recovery stumbles

China's factory activity falls faster than expected as recovery stumbles | The Enterprise World

In May, China’s manufacturing activity decreased more quickly than anticipated due to weaker demand, putting pressure on officials to support a shaky economic recovery and lowering Asian financial markets.

PMI dropped to a five-month low

The National Bureau of Statistics (NBS) said on Wednesday that the official manufacturing purchasing managers’ index (PMI) dropped to a five-month low of 48.8, down from 49.2 in April and below the 50-point threshold that distinguishes expansion from contraction. The PMI also fell short of expectations for a rise to 49.4.

In May, the expansion of the service sector was slower than it had been for the previous four months, with the official non-manufacturing PMI dropping from 56.4 to 54.5. The yuan, as well as the Australian and New Zealand dollars, fell substantially, and regional stocks fell as a result of the data, sending Asian markets into the red. Bruce Pang, the chief economist at Jones Lang LaSalle, stated that the PMI data indicated that China might be headed for a K-shaped rebound.

No efficient and effective policy changes

If there are no efficient and effective policy changes to engineering a broad-based recovery, the weak domestic demand could have an adverse influence on China’s sustainable growth, according to Pang. The PMIs also confirmed disappointing manufacturing statistics from other regions of Asia, with South Korean production falling and Japan reporting an unexpected drop in output.

After three years of pandemic lockdowns, the second-largest economy in the world is beginning to recover, but the recovery has been uneven, with services spending outpacing activity in the manufacturing, real estate, and export-oriented sectors. According to the PMI subindexes for May, manufacturing output turned negative from positive, while new orders, including new exports, declined for the second consecutive month. According to NBS, the production and demand for the chemical, ferrous metal smelting, and rolling processing industries, each experienced considerable reductions.

Also Read: Asian Stocks Fall amid Inflation Worries

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