Chinese manufacturing output surged the most in 9 years in May, signalling a coronavirus recovery

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  • China’s manufacturing output expanded the most in nine years in May, according to IHS Markit’s Purchasing Managers Index data released on Monday.
  • However, Chinese government data showed a slight contraction in manufacturing activity between April and May.
  • The IHS Markit data focuses on small- and medium-sized enterprises, while the National Bureau of Statistics PMI leans towards large and state-owned enterprises.
  • Visit Business Insider’s homepage for more stories.

China’s manufacturing output surged the most in nine years in May as restrictions tied to the COVID-19 outbreak were eased, analytics firm IHS Markit revealed on Monday.

The market-research firm’s Caixin China General Manufacturing Purchasing Managers Index (PMI) posted an overall reading of 50.7, up from 49.4 in April, returning to expansion territory.

“The above 50.0 reading signalled a renewed improvement in overall operating conditions midway through the second quarter, albeit one that was only marginal,” IHS Markit said in the release.

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The firm attributed the recovery to supply chains being stabilised after severe disruptions in recent months. However, it added that inventories remain a concern with some vendors facing shortages of both purchases and finished items.

“Manufacturing production recovered faster than demand as the domestic economy recovered from the epidemic,” Dr. Wang Zhe, senior economist at Caixin Insight Group, said in the release. “Sluggish exports remained a big drag on demand as the virus continued spreading overseas.”

Screenshot 2020 06 01 at 09.24.07IHS MarkitChina Manufacturing PMI

China’s national statistics authority reported a slight contraction in manufacturing in May. Its PMI reading was 50.6, down from 50.8 in April.

The contrasting results may reflect a key difference between the indexes. IHS Markit’s PMI focuses on small- and medium-sized private manufacturers, while the government PMI leans towards large, state-owned companies.

PMI survey data is widely used to track trends in economic activity across different countries. A reading above 50 signals expansion, a reading below indicates contraction, and a reading of 50 suggests a steady level of activity.

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The promising IHS Markit reading likely reflects growing optimism that the Chinese economy will rebound from the pandemic.

Last month, official Chinese data suggested industrial activity bounced back in a ‘V-shaped’ recovery as production rose 3.9% year-on-year in April after a sharp drop in the first three months of 2020.

The rebound came after national gross domestic product shrank by 6.8% in the first quarter of the year, as production and spending ground to a halt due to forced business closures, lockdowns, and supply-chain disruptions.

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