China May official PMI stronger than expected

Fri May 31, 2013 10:23pm EDT
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BEIJING (Reuters) - China's official PMI rose to 50.8 in May from 50.6 in April, data showed on Saturday, beating market expectations and raising optimism that the world's second-largest economy may be stabilizing.

Investors will get a fuller picture of the Chinese economy on Monday when the official services PMI is released along with the final HSBC survey that focuses on smaller private sector firms in the country.

The official purchasing managers' index (PMI), issued by the National Bureau of Statistics and China Federation of Logistics and Purchasing, indicated activity in China's vast manufacturing sector picked up slightly in May.

The reading was stronger than market expectations of 50.1 in a Reuters poll.

A reading above 50 indicates expanding activity while a reading below that level points to a contraction.

"The slight pick-up in May PMI reinforces signs of stabilizing of the economy," Zhang Liqun, an economist at the Development Research Centre, a top government think tank in Beijing, said in an emailed statement accompanying the index.

China's annual economic growth slowed to 7.7 percent in the first quarter from 7.9 percent in the previous quarter, despite a credit boom fuelled by the thriving shadow financing.

A sub-index measuring new orders inched up to 51.8 in May from 51.7 in April, indicating stronger demand for Chinese goods. A sub-index of new export orders also edged up to 49.4 from 48.6.

Saddled with excess capacity, China's factories are struggling against weak demand, as Beijing's campaign against extravagance among state officials takes a toll on domestic consumption.   Continued...

An employee works inside a textile factory in Linhai, Zhejiang province, May 30, 2013. REUTERS/William Hong