This is below the 50-point threshold that distinguishes expansion from contraction and the index’s lowest point in five months. The PMI increased to 49.4, falling short of forecasts. May saw the worst growth in the services sector in four months, with the official non-manufacturing purchasing managers’ index dropping from 56.4 in April to 54.5 in May.
The data caused the yuan, the Australian, and New Zealand dollars to decline along with regional stocks, which pushed Asian markets lower.
China’s Factory Activity
According to Bruce Pang, chief economist at Jones Lang LaSalle, “the PMI data suggests that China may be headed for a choppy recovery.” If there are no effective policy measures for a wide recovery, weak domestic demand “could affect China’s sustainable growth,” he continued.
As a result of the Corona pandemic, China’s economy was in lockdown for three years. Further evidence that the post-opening rebound is stalling comes from PMI indices and other economic statistics from April.
- PMI falls below 50, services sector growth slows in May.
- PMI data suggests China may face a choppy recovery, impacting sustainable growth.
- China’s Premier calls for targeted demand increase, central bank promises stability.
According to China’s PMI data, there has been a K-shaped rebound following the recession, with different sectors improving at various rates. The GDP growth projections for 2023 have been cut by Nomura and Barclays.
The central bank cut the ratios governing bank reserve requirements in March in an effort to boost lending growth.
Premier Li Qiang of China called for more focused action to increase demand, while the central bank promised “strong and stable” support for the real economy. The market is still pessimistic and there is little sign that the administration would act soon.
