Chinese factory
activity contracted for a third month in May and output shrank at the
fastest rate in just over a year, a private survey showed, indicating
persistent weakness in the world's second-largest economy that requires
increased policy support.
The
poor reading, which followed a raft of downbeat April data, reinforced
analysts' views that Beijing has to take bolder steps to combat a
protracted slowdown, as growth threatens to drop below 7 percent for the
first time since the global financial crisis.
"The subdued flash PMI print suggests there is no clear sign of near-term stabilization in the economy. Risks to the outlook remain to the downside," Barclays economist Shengzu Wang said in a research note.
The preliminary HSBC/Markit Purchasing Managers' Index (PMI) fell to 49.1 in May, below the 50-point level that separates growth in activity from a contraction on a monthly basis.
Economists polled by Reuters had forecast a reading of 49.3, slightly stronger than April's final reading 48.9.
After a brief rebound in February, the index has now been back in negative territory for three consecutive months.
"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," said Annabel Fiddes, an economist at Markit.
“On a positive note, deflationary pressures remained relatively strong, with both input and output prices continuing to decline, leaving plenty of scope for the authorities to implement further stimulus measures if required.”
The latest survey showed China's factories continue to struggle with sluggish demand at home and abroad.
The sub-index on new export orders fell to a 23-month low of 46.8 in May, while overall new orders shrank for the third straight month, albeit at a slower pace.
The output sub-index contracted for the first time this year, to a 13-month low of 48.4, while the employment sub-index showed manufacturers shed jobs for the 19th month in a row.
The central bank is widely expected to cut interest rates further in coming months, on top of three reductions since November, and is also likely to lower banks' reserve requirements again to reduce companies' borrowing costs and encourage more lending.
The government is stepping up fiscal spending, with a strong focus on infrastructure projects. China has approved 250 billion yuan ($40.30 billion) of railway and subway projects so far this year, the country's top economic planner said on Monday.
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| Add captionWorkers carry solar panels as they work at a solar power plant which is under construction on a hill in Wuhu, Anhui province September 16, 2014. |
"The subdued flash PMI print suggests there is no clear sign of near-term stabilization in the economy. Risks to the outlook remain to the downside," Barclays economist Shengzu Wang said in a research note.
The preliminary HSBC/Markit Purchasing Managers' Index (PMI) fell to 49.1 in May, below the 50-point level that separates growth in activity from a contraction on a monthly basis.
Economists polled by Reuters had forecast a reading of 49.3, slightly stronger than April's final reading 48.9.
After a brief rebound in February, the index has now been back in negative territory for three consecutive months.
"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," said Annabel Fiddes, an economist at Markit.
“On a positive note, deflationary pressures remained relatively strong, with both input and output prices continuing to decline, leaving plenty of scope for the authorities to implement further stimulus measures if required.”
The latest survey showed China's factories continue to struggle with sluggish demand at home and abroad.
The sub-index on new export orders fell to a 23-month low of 46.8 in May, while overall new orders shrank for the third straight month, albeit at a slower pace.
The output sub-index contracted for the first time this year, to a 13-month low of 48.4, while the employment sub-index showed manufacturers shed jobs for the 19th month in a row.
The central bank is widely expected to cut interest rates further in coming months, on top of three reductions since November, and is also likely to lower banks' reserve requirements again to reduce companies' borrowing costs and encourage more lending.
The government is stepping up fiscal spending, with a strong focus on infrastructure projects. China has approved 250 billion yuan ($40.30 billion) of railway and subway projects so far this year, the country's top economic planner said on Monday.
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