This missed expectations for manufacturing to hold steady at 50.4.
“The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds,” wrote Hongbin Qu, chief economist for China at HSBC.
“A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery. Moreover, the further signs of labour market slackness call for more policy support. Beijing still has fiscal ammunition to do so.”
A breakdown of the report showed that nearly all the sub-indices including new orders, new export orders, and employment decreased.
Here’s the complete breakdown:
Before tonight’s data release, Deutsche Bank‘s John Horner wrote that this month’s “Flash PMI is even more important than usual.” This he said was because Chinese data has recently disappointed markets and has once again raise questions about economic growth.
“Further weakness will heighten concerns of a ‘broken’ Chinese growth dynamic that is no longer responding to rapid credit expansion.”
Here’s a look at Chinese PMI and credit growth: