BEIJING- China’s factory activity fell at a slower pace in May as COVID-19 curbs in major manufacturing hubs were relaxed, but movement controls continued to weigh on demand and production, raising doubts about economic growth in the second quarter.
The official manufacturing purchasing managers’ index (PMI) rose to 49.6 in May from 47.4 in April, the National Bureau of Statistics (NBS) said on Tuesday, beating forecasts in a Reuters poll of 48.6.
China’s factory slowdown is affecting production lines in other major Asian economies with both Japan and South Korea reporting sharp declines in output.
While the PMI hit a three-month high, it remained below the 50-point mark that separates contraction from growth for the third straight month.
“It shows the impact of COVID-19 outbreaks in May have not fully ended, leaving the economic outlook grim since the second quarter in 2020,” said Pang Ming, chief economist at Huaxing Securities.
Declines in China’s midstream and downstream production were larger than they were upstream and small firms were hit harder than large firms, Pang said.
The sub-index for production rose to 49.7 in May from 44.4 in April while the new orders subindex rose to 48.2 from 42.6.
“This showed manufacturing production and demand have recovered to varying degrees, but the recovery momentum needs to be strengthened,” said Zhao Qinghe, senior statistician at the NBS, in a statement accompanying the data release.
Though restrictions in the major manufacturing hubs of Shanghai and in the northeast eased in May, analysts said the output resumption was slow, restrained by sluggish domestic consumption and softening global demand.
Sheana Yue, an economist at Capital Economics, said although activity has started to rebound as COVID-19 curbs ease, the recovery is likely to remain tepid.
