Activity across smaller Chinese manufacturers continues to deteriorate in May

Shanghai, China. Photo: Getty Images

Manufacturing activity across small and medium-sized Chinese industrial firms contracted at a slightly slower pace in May with the HSBC-Markit PMI gauge rising to 49.2.

The figure, higher than the 48.9 level of April and “flash” estimate of 49.1 offered in late May, was the third consecutive month that activity across the sector had contracted.

In a sign that smaller firms are doing it tougher than their larger rivals at present, the reading was considerably weaker than the government’s official manufacturing PMI gauge for May, which increased to 50.2 from 50.1 in April.

The key difference between the two, aside from a smaller sample base for the HSBC-Markit survey, is that the government figure includes activity from small, medium and large industrial firms, not just small and medium-sized companies.

Annabel Fiddes, economist at Markit, paints a bleak picture of the survey’s findings.

“The headline PMI signalled a further deterioration in the health of China’s manufacturing sector in May. 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.

Furthermore, sustained job cuts, ongoing destocking activities and reduced purchasing activity all suggest that the sector may remain in contractionary territory as we head into mid-year. The latest survey data therefore suggest that more stimulus measures may be required to help boost domestic demand and recover some growth momentum.”

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