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Manufacturing activity seen contracting in May

2013-05-24 10:37 Global Times     Web Editor: qindexing comment

Activity in China's factory sector contracted for the first time in seven months in May, a preliminary survey showed Thursday, stoking concerns that the recovery of the Chinese economy remains fragile.

The flash HSBC purchasing managers' index (PMI) shrank to 49.6 for May, as a result of a decrease in new orders, according to the data released Thursday by HSBC.

It was the first time since October that the figure was below the level of 50, which separates expansion from contraction. The final HSBC PMI reading for April was 50.4.

"The cooling manufacturing activity in May reflected slower domestic demand and ongoing external headwinds," Qu Hongbin, chief China economist at HSBC, said in a statement sent to the Global Times Thursday.

The poor reading also came after many economists and investment banks had cut their forecasts for China's economic growth.

"A sequential slowdown is likely in the middle of the second quarter, casting downside risk on China's fragile recovery. Moreover, further signs of slackness in the labor market call for more policy support," Qu said.

The low reading may indicate a risk of stagflation for the economy, Yang Weixiao and Sheng Xu, macroeconomic analysts with Lianxun Securities Co, wrote in a note sent to the Global Times Thursday.

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