China’s manufacturing sector contracted for the first time in seven months in May amid poor demand, fueling concerns that the weakness in the economy may persist for some more time.
The headline purchasing managers’ index, an indicator of the health of the factory sector, fell to a seven-month low of 49.6 in May from 50.4 in April.
Readings below 50 indicate contraction of the sector. Economists expected the index to remain unchanged from March’s level.
New orders decreased in May reversing April’s gains, while the rate of decline in export orders slowed. Manufacturers shed jobs at a faster pace this month, the survey found.
“The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds,” said Hongbin Qu, Chief Economist at HSBC. “A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery. Moreover, the further signs of labour market slackness call for more policy support,” the economist said.
The flash manufacturing output index edged down to 51 from 51.1 in April. While the index remained in the positive territory, it indicated that production growth was at the weakest level in three months.
While output prices in the manufacturing sector decreased at a faster pace, the rate of fall in input costs slowed.
China’s GDP growth eased to 7.7 percent in the first quarter from the 7.9 percent expansion in the fourth quarter, which ended seven quarters of economic slowdown. Industrial production, retail sales and fixed asset investment reported lackluster growth in April, suggesting fragile recovery.
The International Monetary Fund expects China to grow 8 percent this year and by 8.2 percent in 2014, weaker than its previous forecast. The World Bank had also cut its 2013 growth outlook for the economy to 8.3 percent.
by RTT Staff Writer
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