Apparently, signs of the China's economic recovery are weakening as the latest flash manufacturing PMI showed that factory activity slumped significantly in May. Data released by HSBC Holdings Plc indicated that the economic growth of the world’s second economy was visibly slackening in the second quarter of the year. It seems that bad days are gathering over China’s manufacturing.
Flash manufacturing PMI for May
On the 23rd of May, HSBC Holdings Plc and Markit Economics released its flash China’s manufacturing PMI, indicating that factory activity contracted in May for the first time in seven months after witnessing some disturbing signs that the economic recovery of the Asian dragon was slowing down. The findings showed that China saw its manufacturing PMI slumped drastically to 49.6 in May, compared with the April’s final reading of 50.4. The reading indicated that factory activity contracted, adding to signs that the economic recovery was not as strong as analysts initially thought. Interestingly, analysts believed that there would be no contraction in the segment.
HSBC Holdings Plc informed that a sub-index showed that overall new orders slumped to 49.5 in May, indicating that China was not able to offset significantly anemic external demand. It may come as no surprise that new export orders also declined below the significant 50-point level which divides conventionally expansion from contraction.
Qu Hongbin, chief China economist at HSBC Holdings Plc, underlined: “The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds,” adding that another slowdown was possible in the ongoing three-month period.
The findings released by HSBC Holdings Plc showed that China’s factory activity substantially suffered from anemic foreign demand which is certainly another reason why the authorities will be even more determined while aiming to scale down the country'd export dependence.
Strength of China’s recovery is up in the air
Undeniably, the findings released by HSBC Holdings Plc will feed analysts and investors’ nightmares about the strength of the China’s economic recovery. The fact is that the latest data on factory activity for May added to not optimistic figures for April which in fact undermined confidence in China's economic improvement.
Interestingly, some analysts are convinced that the flash China’s manufacturing PMI for May will push authorities to start a debate over the ongoing alarming situation, but others note that the new government has many times underlined that it is not likely to use further stimulus measures. Furthermore, data on factory activity added to signs that China’s economic growth in the ongoing quarter would slow down substantially from the one for the first three months of the year when authorities informed that it had slumped to approximately 7.7 percent.
The fact is that many questions are mounting over the strength of the China’s economic recovery.