Sugar factory activity shrinks as economic recovery slows

China’s factory activity contracted for a second month in a row, while growth in the services sector slowed, showing signs of slowing in the post-pandemic recovery in the world’s second-largest economy.

According to the National Bureau of Statistics, the official manufacturing purchasing managers’ index for May came in at 48.8, compared with 49.2 in April.

The non-manufacturing PMI, which includes industries such as the service sector and construction, stood at 54.5 in May, down from the previous month’s figure of 56.4.

Economists said several months of manufacturing readings below 50, indicating a contraction, would prompt the government to consider stimulus policies to support the economy, which has been hit hard this year by Beijing’s strict zero-Covid controls. The latter has struggled to maintain strong growth. Exports have also lagged, as global demand for Chinese goods has failed to pick up.

“We expected the initial rebound to be led by a resumption of consumption and services, and optimism would eventually broaden the base of this economic recovery to include stronger manufacturing and investment,” said Carlos Casanova, senior Asia economist. will translate. UBP. “That widening hasn’t happened yet.”

Weak data sent regional currencies lower against the dollar on Wednesday and weighed on equity markets that were already weighed down by concerns about China’s uneven economic rebound. An index of Chinese shares listed in Hong Kong slipped into bear market territory.

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China’s economy grew rapidly in the first quarter, but the recovery has begun to falter in the last two months. Property investment, credit and industrial profit declined, while indicators such as retail sales fell short of analysts’ expectations, casting doubt on the government’s full-year modest growth target of 5 percent.

“The foundation for recovery and growth still needs to be consolidated,” Zhao Qinghe, a senior NBS statistician, said in a statement on Wednesday. In the manufacturing sector, he said, “production and demand slowed down markedly”.

Hong Kong’s Hang Seng China Enterprises index, which tracks large mainland Chinese companies, fell more than 2 percent on Wednesday, bringing the benchmark down more than 20 percent from its most recent peak in January and plunging it into a bear market. . The CSI 300 index of China’s Shanghai- and Shenzhen-listed stocks fell 1.2 percent.

The renminbi slipped 0.4 percent to Rmb7.1051 against the dollar, leaving it down nearly 3 percent for the year. The currencies of China’s biggest exporters also sold off, with the Australian and New Zealand dollars down 0.5 percent and 0.4 percent, respectively, against the greenback.

A sub-index of new export orders declined from 47.6 in April to 47.2 in May, “pointing to weaker external demand”, Goldman Sachs said in a research note. The bank said deflationary pressures on the manufacturing sector were “partially due to fall in commodity prices and lackluster market demand”.

The data indicated strong expansion in service industries such as airlines, ship and road transport services and telecommunications but continued weakness in assets.

“There is this wide discrepancy between the service and manufacturing side,” said UBP’s Casanova, adding that “the economic recovery has been extraordinarily uneven”.

However, the slump in demand for services following the end of Covid-19 control will ease in the coming months, he said, adding that the outlook for economic growth this quarter and next year is “a bit more complicated than we initially thought”. .

Reporting by William Langley, Andy Lin and Hudson Lockett in Hong Kong, Joe Leahy in Beijing and Thomas Hale in Shanghai

China’s factory activity contracted for a second month in a row, while growth in the services sector slowed, showing signs of slowing in the post-pandemic recovery in the world’s second-largest economy.

According to the National Bureau of Statistics, the official manufacturing purchasing managers’ index for May came in at 48.8, compared with 49.2 in April.

The non-manufacturing PMI, which includes industries such as the service sector and construction, stood at 54.5 in May, down from the previous month’s figure of 56.4.

Economists said several months of manufacturing readings below 50, indicating a contraction, would prompt the government to consider stimulus policies to support the economy, which has been hit hard this year by Beijing’s strict zero-Covid controls. The latter has struggled to maintain strong growth. Exports have also lagged, as global demand for Chinese goods has failed to pick up.

“We expected the initial rebound to be led by a resumption of consumption and services, and optimism would eventually broaden the base of this economic recovery to include stronger manufacturing and investment,” said Carlos Casanova, senior Asia economist. will translate. UBP. “That widening hasn’t happened yet.”

Weak data sent regional currencies lower against the dollar on Wednesday and weighed on equity markets that were already weighed down by concerns about China’s uneven economic rebound. An index of Chinese shares listed in Hong Kong slipped into bear market territory.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

China’s economy grew rapidly in the first quarter, but the recovery has begun to falter in the last two months. Property investment, credit and industrial profit declined, while indicators such as retail sales fell short of analysts’ expectations, casting doubt on the government’s full-year modest growth target of 5 percent.

“The foundation for recovery and growth still needs to be consolidated,” Zhao Qinghe, a senior NBS statistician, said in a statement on Wednesday. In the manufacturing sector, he said, “production and demand slowed down markedly”.

Hong Kong’s Hang Seng China Enterprises index, which tracks large mainland Chinese companies, fell more than 2 percent on Wednesday, bringing the benchmark down more than 20 percent from its most recent peak in January and plunging it into a bear market. . The CSI 300 index of China’s Shanghai- and Shenzhen-listed stocks fell 1.2 percent.

The renminbi slipped 0.4 percent to Rmb7.1051 against the dollar, leaving it down nearly 3 percent for the year. The currencies of China’s biggest exporters also sold off, with the Australian and New Zealand dollars down 0.5 percent and 0.4 percent, respectively, against the greenback.

A sub-index of new export orders declined from 47.6 in April to 47.2 in May, “pointing to weaker external demand”, Goldman Sachs said in a research note. The bank said deflationary pressures on the manufacturing sector were “partially due to fall in commodity prices and lackluster market demand”.

The data indicated strong expansion in service industries such as airlines, ship and road transport services and telecommunications but continued weakness in assets.

“There is this wide discrepancy between the service and manufacturing side,” said UBP’s Casanova, adding that “the economic recovery has been extraordinarily uneven”.

However, the slump in demand for services following the end of Covid-19 control will ease in the coming months, he said, adding that the outlook for economic growth this quarter and next year is “a bit more complicated than we initially thought”. .

Reporting by William Langley, Andy Lin and Hudson Lockett in Hong Kong, Joe Leahy in Beijing and Thomas Hale in Shanghai