China factory data signals weak first-half growth

Thu May 24, 2012 4:37am EDT
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By Lucy Hornby

BEIJING (Reuters) - China's factories faltered in May as export orders fell to two month lows, a private sector survey showed on Thursday, suggesting surprise weakness in April's hard economic data persists even as policymakers seek to shore up growth.

The HSBC Flash Purchasing Managers Index, the earliest indicator of China's industrial sector, retreated to 48.7 in May from a final reading of 49.3 in April. It marked the seventh straight month that the index has been below 50, indicating contracting economic activity.

The figures signal that the sluggish economic conditions of the first quarter are set to continue throughout the first half of the year in China's longest slowdown since the global financial crisis.

"Policymakers have been and will step up easing efforts to stabilize growth," HSBC's chief economist Qu Hongbin, wrote in a statement accompanying the PMI release. "As long as the easing measures filter through, China will secure a soft landing in the coming quarters."

Factory output hit a seven-month high, building on a rebound of new orders in April. But new orders fell back in May's flash survey with a sharp fall in new orders from overseas.

The new export orders sub-index dropped to 47.8 from April's final figure of 50.2 - pushing it back to within a whisker of March's 47.7 - according to data from Markit Economics Research, which publishes the index.

The Chinese data weighed moderately on financial markets, although most focus was on the euro zone's deepening debt crisis and the risk that Greece will leave the bloc.

A euro zone flash PMI fell in May to its lowest level since June 2009. German manufacturing was shrinking in May at its fastest pace in three years, data showed.   Continued...

An employee looks at an assembly line at a Ford manufacturing plant in Chongqing municipality April 20, 2012. REUTERS/Stringer