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Flash PMI Shows Drop in Production Bustle
May 25,2012 13:44CST
data analysis
Private companies in China may see a deterioration in their manufacturing activities again in May.

BEIJING, May 25 (Xinhua) -- Private companies in China may see a deterioration in their manufacturing activities again in May as a preliminary reading for the HSBC Purchasing Managers' Index suggested a seventh straight month of contraction.

The HSBC Flash PMI for May, the earliest available indicator of China's industrial sector, fell to 48.7 from 49.3 in April, the bank said yesterday. A reading under 50 signals contraction.

If the reading is confirmed on June 1, it will be the seventh consecutive month for the country's private manufacturers to report a shrinkage - the longest run of below-50 readings since the 2008 global financial crisis.

Qu Hongbin, chief economist for China at HSBC, said the fall in the PMI, geared toward private and export-oriented firms, reflected a deterioration in operating conditions for manufacturers.

"Manufacturing activities softened again in May due to the deteriorating export situation," Qu said.

"This calls for more aggressive policy easing. China has been and will step up efforts to stabilize growth, as indicated by measures to boost liquidity, public housing and infrastructure investment as well as consumption," Qu said.

Chang Jian, an economist at Barclays Capital, said the index reading indicated the economy remained soft in May and the downside risks from worsening external conditions have increased.

The component indices under the HSBC Flash PMI showed new export orders fell to 47.8 from 50.2, a sign of further weakness in external demand and export growth.

On Wednesday, China unveiled a set of new measures to boost the economy. The State Council, or Cabinet, said construction of major infrastructure projects will accelerate. Private investment in state-dominated fields like railways, energy, telecommunications, education and health care will be encouraged.

China's gross domestic product grew 8.1 percent year on year in the first quarter, the weakest in nearly three years. April's key economic data, including industrial production, fixed-asset investment and retail sales, moderated and stoked fears of a sharp economic slowdown.

China International Capital Corp, the country's largest investment bank, said earlier this week that economic growth may fall to 6.4 percent this year, below the government's 7.5 percent target.


manufacturing activities; May

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