China manufacturing PMI grows more than expected in May - Caixin

Investing.com -- Chinese manufacturing activity grew more than expected in May, a private survey showed on Thursday, contrasting government data from earlier this week that pointed to a sustained decline in China’s biggest growth engines. 

The Caixin Manufacturing Purchasing Managers’ index (PMI) read 50.9 in May, more than expectations for a reading of 50.3, and the prior month’s figure of 49.5.

A reading above 50 indicates growth in the sector, as production improved after an unexpected contraction in April. 

Production picked up from a lull in April, and was at its fastest pace since June 2022, Caixin Insights said in a note.

The data comes just a day after an official survey showed a deepening contraction in China’s manufacturing sector, which spurred concerns that a post-COVID economic rebound was stalling.

But the Caixin survey, which differs from the official survey in that it focuses more on smaller, private enterprises, as opposed to bigger, state-run enterprises, indicated that some facets of China’s massive manufacturing sector were recovering after the lifting of most anti-COVID restrictions earlier this year. 

Investors usually use both surveys to gauge a broader picture of Chinese manufacturing. 

The Caixin data showed that demand improved through May, as shown by increased client orders and a corresponding increase in production. The sector also benefited from low input costs, amid rampant disinflation in China.

Still, analysts at Caixin Insights noted that a broader economic recovery in China remained sluggish, and was still vulnerable to slowing demand and a weak job market. 

“Current economic growth lacks internal drive and that market entities lack sufficient confidence, highlighting the importance of expanding and restoring demand… stabilizing employment, increasing income and bolstering expectations through proactive fiscal policy should be prioritized given a dire job market and mounting deflationary pressure,” Wang Zhe, Senior Economist at Caixin Insight Group said in a note.

Zhe also noted that employment in the manufacturing sector remained sluggish, while producers were growing less optimistic about a recovery this year. 

While the Chinese government has rolled out a slew of liquidity and stimulus measures to support economic growth, private investment has remained laggard as investors grew uncertain over an economic recovery in the country this year.

 

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