China HSBC PMI at 49.2 in May, contracts third month, export orders near two-year low

Sun May 31, 2015 10:05pm EDT
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BEIJING, (Reuters) - Activity in China vast factory sector shrank for a third consecutive month in May as export orders contracted at the sharpest rate in nearly two years, a private survey showed on Monday, suggesting China remains locked in an economic cooldown.

The final HSBC/Markit Purchasing Managers' Index (PMI) stood at 49.2 in May, below the 50-point level that separates an expansion from a contraction in activity on a monthly basis.

That is little changed from a preliminary reading of 49.1, and up a touch from April's 48.9.

In a sign that China's sputtering economy could face bigger headwinds in the short-term, a sub-index for new exports skidded to 46.7, a low unseen since June 2013, and well below April's 50.3.

Factory output also shrank for the first time this year as the sub-index slipped under 50.

"A solid fall in new export work contributed to fewer new orders, which in turn led to the first contraction of output in 2015 so far," said Qu Hongbin, an economist at HSBC in Hong Kong.

Add to that persistent job losses and reduced factory purchases, Qu said the data called for more stimulus measures to stoke domestic demand and economic growth.

HSBC/Markit said companies had reported a broad weakening in overseas demand last month, which reduced factory production and fueled job cuts among manufacturers.

The PMI showed factory employment shrank in May for the 18th straight month, even though the pace of contraction eased from the rates seen in March and April.   Continued...

An employee works at a machine manufacturing factory in Huaibei, Anhui province, September 1, 2014.  REUTERS/Stringer