Manufacturing
activity in Asia's top two economic powerhouses remained stuck in low
gear in May, but an absence of inflation pressures suggested that
authorities could inject yet more stimulus if needed.
The
lackluster performance in China and Japan, along with alarmingly weak
export data from South Korea and Taiwan, put the burden of supporting
global growth squarely on Europe and particularly the United States,
which is struggling to get back on track after a fierce winter.
China's factory activity contracted for the third straight month in May as domestic and export orders shrank, a private survey showed, adding to views that Beijing will have to roll out its most aggressive stimulus measures since the global financial crisis to avert a sharper slowdown.
"The subdued flash PMI print suggests there is no clear sign of near-term stabilization in (China's) economy. Risks to the outlook remain to the downside," Barclays economist Shengzu Wang said in a research note.
The flash or preliminary HSBC/Markit Purchasing Managers' Index (PMI) fell to 49.1 in May, weaker than an expected 49.3 and marking the fifth contraction in activity in six months.
China has already cut interest rates three times in six months and economists believe it will have to ease further as economic growth threatens to slow below the 7-percent pace seen in the first quarter.
Annabel Fiddes, an economist at Markit, said relatively strong deflationary pressures should leave plenty of scope for the authorities to implement further stimulus measures.
Analysts at Nomura saw China's growth slowing to 6.6 percent year-on-year in the second quarter, before edging up to 6.8 percent in the second half of the year.
"To offset the headwinds from deep-seated structural challenges, we maintain our call of further monetary easing with two more 50-basis-point (bps) cuts to banks' reserve requirement ratio and two more 25 bp policy interest rates cuts over the rest of this year," they said.
China's factory activity contracted for the third straight month in May as domestic and export orders shrank, a private survey showed, adding to views that Beijing will have to roll out its most aggressive stimulus measures since the global financial crisis to avert a sharper slowdown.
"The subdued flash PMI print suggests there is no clear sign of near-term stabilization in (China's) economy. Risks to the outlook remain to the downside," Barclays economist Shengzu Wang said in a research note.
The flash or preliminary HSBC/Markit Purchasing Managers' Index (PMI) fell to 49.1 in May, weaker than an expected 49.3 and marking the fifth contraction in activity in six months.
China has already cut interest rates three times in six months and economists believe it will have to ease further as economic growth threatens to slow below the 7-percent pace seen in the first quarter.
Annabel Fiddes, an economist at Markit, said relatively strong deflationary pressures should leave plenty of scope for the authorities to implement further stimulus measures.
Analysts at Nomura saw China's growth slowing to 6.6 percent year-on-year in the second quarter, before edging up to 6.8 percent in the second half of the year.
"To offset the headwinds from deep-seated structural challenges, we maintain our call of further monetary easing with two more 50-basis-point (bps) cuts to banks' reserve requirement ratio and two more 25 bp policy interest rates cuts over the rest of this year," they said.
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