China factory activity slows, adding to economic strains

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FILE - Workers install window panels on a minibus at a factory during a media organized tour in Shiyan city in central China's Hubei Province on May 10, 2023. A survey Wednesday, May 31, 2023 showed China's factory activity decelerated in May, adding to signs its economic rebound after the end of anti-virus controls is slowing. (AP Photo/Andy Wong, File)

BEIJING – China's manufacturing slowdown deepened in May as consumer and export demand weakened, a survey showed Wednesday, adding to signs an economic rebound following the end of anti-virus controls is slowing.

Chinese leaders are under pressure to shore up the recovery after a survey found a record 1 in 5 young workers in cities were unemployed. Consumer spending in April was weaker than expected and factory output declined compared with the previous month.

The monthly Purchasing Managers' Index issued by the national statistics agency and an industry group retreated to 48.4 from April's 49.2 on a 100-point scale. Numbers below 50 show activity declining.

The decline “suggests that the risk of a downward spiral, especially in the manufacturing sector, is becoming more real,” said Nomura economists in a report. They said the PMI was likely to remain in negative territory in June.

Chinese manufacturers have been hurt by weakening global demand after central banks in the United States, Europe and Asia raised interest rates to cool inflation.

At home, Chinese consumer spending revived after anti-virus curbs on travel and business activity were lifted in December. But the recovery has been weaker than expected.

Economic growth accelerated to 4.5% over a year earlier in the three months ending in March, from the previous quarter’s 2.9%. But growth will have to rise further to hit the ruling Communist Party’s annual target of “around 5%.”

A measure of new orders fell to 48.3 from April's 48.5 on a similar 100-point scale, according to the National Bureau of Statistics and the China Federation of Logistics & Purchasing. An index of export orders declined to 47.2 from the previous month's 47.6.

The survey suggests “China's economic recovery was still ongoing in May, albeit at a slower pace,” said Capital Economics in a report. “Industry is struggling and fiscal support for construction waning. But the service sector is still seeing decent gains.”


China Federation of Logistics & Purchasing (in Chinese):