China's factory activity at 8-month high

China's manufacturing activity in May expanded at the fastest pace in eight months.

China’s manufacturing activity in May expanded at the fastest pace in eight months.

The Purchasing Managers’ Index for the manufacturing sector rose to 51.9 in May from 51.4 in April, and was 0.7 higher than that in the same month of last year, data released yesterday by the National Bureau of Statistics showed.

The non-manufacturing PMI also edged up from April by 0.1 to 54.9 last month and was 0.4 higher than a year earlier.

The general PMI, which covers both manufacturing and services industries, advanced to 54.6 from April’s 54.1.

A reading above 50 indicates expansion, while a reading below that reflects contraction.

“The increase in PMI indicates the factory activity is expanding at a faster pace with stronger momentum,” said Zhao Qinghe, the statistics bureau’s senior statistician.

The sub-indexes for production and new order rose 1.0 and 0.9, respectively, to 54.1 and 53.8, signaling the steady expansion in both production and demand, Zhao said.

In terms of corporate scale, the indicators for large and medium-sized firms were respectively 1.1 and 0.3 higher than the previous month to be 53.1 and 51 in May. However, small companies “appeared to remain vulnerable amid credit default concerns” to retreat 0.7 to 49.6 last month, reversing the pickup in April, and which “probably indicates some uncertainty down the road amid economic deleveraging,” according to the Australia and New Zealand Banking Group.

But the statistics bureau’s Zhao said: “The sub-index of expectations on production and operation activities rose 0.9 to 58.2 in May, indicating the small-sized companies are still holding optimistic expectations for the future development.”

Meanwhile, the input and output price sub-indexes both jumped in May, up from 53 and 50.2 in April to 56.7 and 53.2, respectively, implying a rise in inflationary pressures on the supply side during the month, according to Nomura.

The PMI for high-tech manufacturing was 54.8 in May, higher than the 53.8 for April and 51.9 for the whole manufacturing sector. As for the non-manufacturing PMI, it remained at a much higher level than the manufacturing PMI, which can be a signal that the economy continues to rebalance toward the service sector, Nomura’s economist Lu Ting said.

Services maintained steady growth, with the index for service business activity being 54 — the second-highest this year — increasing 0.2 from last month and 0.5 from a year earlier.

Expansion in the service industry was led by the consumer-related sectors such as air transport, express delivery, telecommunication and Internet software, the statistics bureau said.

“China’s strong manufacturing PMI print for May will likely translate into steady GDP growth in the second quarter,” said Betty Wang, senior China economist at ANZ Group. Wang predicted a year-on-year GDP growth of 6.7-6.8 percent for the quarter.

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