China's manufacturing PMI down in May

China's manufacturing activity dipped further into contraction in May. The official purchasing managers' index (PMI) for the Chinese manufacturing sector dropped to 48.8 in May from 49.2 in April, below the 50-point mark, the latest data from the National Bureau of Statistics (NBS) showed.

NBS data also showed the subindexes for production and new orders came in at 49.6 and 48.3 in May, down from 50.2 and 48.8 in April respectively. The 50-mark separates growth from contraction on a monthly basis.

What is noteworthy is that the PMIs for equipment manufacturing, high-tech manufacturing, and consumer products industries stood at 50.4, 50.5 and 50.8, respectively.

PMIs for China's equipment manufacturing stood at 50.4 in May, 2023.

The manufacturing activity contraction was due in part to insufficient demand, which puts more pressure on policymakers seeking to consolidate the foundations of economic recovery, and policy support should be stepped up, such as reductions in the reserve requirement ratio and interest rate cuts, reported China Daily.

Wen Bin, Chief Economist at China Minsheng Bank, linked the insufficient demand to factors including households lacking purchasing power for persistently spending, SMEs' weakening expectations, and geopolitical tensions, according to the report.

Despite the challenges, Wen Bin expects China's economy to expand at a faster pace in Q2 due to the low comparison base in the previous year.