Wednesday, 23 August, 2017

China's manufacturing activity expands for 10th month

Reuters Reuters
Earnest Maxwell | 03 June, 2017, 01:28

Operating conditions faced by Chinese goods producers deteriorated for the first time in almost a year in May.

The sub-index for production stood at 53.4 in May, down from 53.8 in April, while the sub-index for new orders came in at 52.3 in May, unchanged from that in April.

Markit said the figure was helped by the fastest increase in residential work since December 2015, which has bounced back after a seven-month low in March.

The May result was slightly lower than a preliminary reading of 54.0 but remained comfortably above the 50-point line dividing expansions in activity from contractions.

The PMI reading, given between 0-100, measures activity in the sector - anything above 50 signals growth, while anything below means contraction. That said, the pace of expansion was the weakest in the current 11- month sequence and only slight.

Improvement in operating conditions has been linked to accelerated rises in both manufacturing output and new orders. Furthermore, Markit noted that new order growth remained strong, whereas the pace of job creations hit its 35-month high in May. He added that panellists reported weak demand both domestically and overseas, citing disappointing sales in nearby Asian economies.

However, goods producers maintained positive expectations towards output in 12 months' time, although the degree of optimism was relatively subdued. Lower staffing levels were partly linked to company down-sizing initiatives, but also the non-replacement of voluntary leavers.

China is transitioning from an investment-driven economic model to one more reliant on consumer spending, which has put the brakes on growth in recent years.

Both domestic demand and exports were solidly increasing over the month, with a weaker sterling encouraging overseas buyers to snap up goods Made in Britain. Also noteworthy, there was a pick - up in the pace at which new orders from overseas increased. Although purchasing activity fell in May, average delivery times continued to lengthen.

Tim Moore, IHS Markit senior economist, said the construction sector was recovering strongly after a sluggish start to 2017.

For the full year as well, manufacturing, like several other industry components reported dismal numbers.

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