China’s manufacturing activity fell for the first time in seven months as export orders weakened. The HSBC Purchasing Managers’ Index (PMI) dropped to 49.2, down from 50.4 in April.
Total new orders fell for the first time since September 2012. New export orders dropped for the second month in a row, and purchasing activity was lower for the first time in eight months. A number of companies suggested that lower demand, particularly in the US, had led to the drop in export orders.
“The downward revision of the final HSBC China Manufacturing PMI suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions,” says Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research.
He added that the weakness may encourage China to consider further economic stimulus to revitalise economic growth. “With persisting external headwinds,
Beijing needs to boost domestic demand to avoid a further deceleration of manufacturing output growth and its negative impact on the labour market. The new leaders should strike a delicate balance between reform and growth.”
The PMI showed staff numbers fell for the second month in a row, though the rate of job reductions was modest. There was better news on manufacturing output, which rose for the seventh month in a row, though the increase was marginal.
Inflationary pressures eased with the cost of raw materials falling for the third successive month, and a number of firms passing on lower costs to their customers.