China’s factory activity swings into surprise growth in May, driven by improved production and demand, easing market anxiety

[beijingwalker]

China’s factory activity swings into surprise growth in May, driven by improved production and demand​

• Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 50.9 last month, up from 49.5 in April
• Reading is in stark contrast to the official manufacturing PMI, which fell to 48.8 in May from 49.2 in April

Published: 10:00am, 1 Jun, 2023

China’s factory activity unexpectedly swung into growth in May from decline, a private sector survey showed on Thursday, driven by improved production and demand, helping struggling firms that have been hit by slumping profits.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 50.9 in May from 49.5 in April, above the 50-point index mark that separates growth from contraction.

The reading surpassed expectations of 49.5 in a Reuters poll, a stark contrast to a deeper contraction activity seen in the official PMI released on Wednesday.

China’s recovery from its strict coronavirus curbs has been fragile and uneven, with economic indicators for April showing imports, factory gate prices and property investment all falling.

The manufacturing subindices showed factory output rose at the fastest clip in 11 months, while new orders including new exports expanded in May.

However, business confidence for the coming 12 months fell to a seven-month low amid concerns over global economic prospects.
Firms, grappling with a slump in industrial profits in April, remained cautious about hiring, with the employment subindex shrinking for the third consecutive month in May.

Insufficient demand is the main constraint for the recovery and deflation risks are rising in the world’s second-biggest economy, analysts said.


The input and output prices gauges continued their declines in May.

“Current economic growth lacks internal drive and that market entities lack sufficient confidence, highlighting the importance of expanding and restoring demand,” said Wang Zhe, senior economist at Caixin Insight Group.

Further monetary policy easing is expected by some economists.

“The central bank will likely cut the reserve requirement ratio by 25 basis points to maintain financial stability, in our view,” said ANZ on Wednesday. “The likelihood of front-loading the rate cut is also rising.”
The Caixin PMI is believed to focus on more export-oriented and small firms in coastal regions and is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.

‘Piece of good news’ as China’s factory activity swings into surprise growth

Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 50.9 last month, up from 49.5 in April, data released on Thursday showed.

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[beijingwalker]

China’s small and medium-sized factories post surprise growth, easing market anxiety​

By Laura He, CNN
Published 1:45 AM EDT, Thu June 1, 2023

A key gauge of China’s small- and medium-sized factories showed their surprise return to expansion last month, which eased market anxiety about growth stalling in the world’s second largest economy.

Asian markets mostly rose Thursday following the release of the data, with sentiment also boosted by abating US debt default risks after the House of Representatives passed a bill to suspend the nation’s debt limit.

The Caixin manufacturing Purchasing Managers’ Index (PMI) rose to 50.9 in May from April’s 49.5, according to a private survey. This is the first improvement of the index since February and signals its return to expansion territory.

A PMI reading above 50 indicates expansion, while anything below that level shows contraction. The Caixin survey is focused on small and medium-sized enterprises.

The Caixin data contrasts sharply with a deepening decline in activity shown in a government survey, which mainly covers larger businesses and state-owned companies, released on Wednesday.

The official manufacturing PMI dropped to 48.8 in May from April’s 49.2, the lowest level since December, when China ended most of its pandemic measures, according to the National Bureau of Statistics. It was the second contraction in as many months.

The surprisingly robust data has alleviated some concern about Chinese growth, said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
https://edition.cnn.com/2023/05/30/economy/china-pmi-economy-intl-hnk/index.html
Nevertheless, the theme of reducing investment exposure to China may remain given the economy’s dissipating growth momentum and elevated geopolitical tensions, he added.
Asian markets received a boost from the Caixin data.

Hong Kong’s Hang Seng (HSI) Index rebounded 0.9%, following a 2.4% decline on Wednesday, which was triggered by the weak official PMI data. Thursday’s gains helped the index avoid bear-market territory.

Japan’s Nikkei 225 (N225) rose 0.6% and China’s Shanghai Composite Index gained 0.5%, both recouping some of Wednesday’s losses. South Korea’s Kospi, however, was down 0.4%.
Sentiment was also lifted by the US House of Representatives approving a deal to raise the country’s debt limit. The legislation will now need to be passed by the Senate before it can be sent to President Joe Biden to be signed into law.

The Chinese currency also recovered some losses against the US dollar. The offshore yuan strengthened 0.1% to trade at 7.11 per dollar. The onshore rate also firmed, up 0.2% versus the greenback.

US oil futures rose on Thursday. WTI, the US benchmark, gained 0.5% to trade at $68.43 per barrel. It settled 2% lower on Wednesday, weighed down by the weak China data and a stronger greenback.

https://edition.cnn.com/2023/06/01/economy/china-caixin-pmi-may-intl-hnk/index.html