April 20, 2024

Chinese Manufacturing Index Falls to 9-Month Low in May

BEIJING — China’s official purchasing managers’ index hit a nine-month low in May, a survey showed Wednesday, reinforcing evidence that economic growth has been slowing under the weight of government credit curbs and power shortages.

The index, which is designed to provide a snapshot of conditions in China’s vast manufacturing sector, fell to 52 from 52.9 in April, the China Federation of Logistics and Purchasing said.

The federation compiles the index on behalf of the National Bureau of Statistics.

“The continued fall in P.M.I. in May, after a drop in April, shows the rising possibility of a slowdown in economic growth,” Zhang Liqun, a government researcher, said in a statement accompanying the data release.

“The input price subindex saw significant decline, indicating a possible change in inflationary expectations,” Mr. Zhang said. “De-stocking activities may increase. All these will drive down the pace of economic growth.”

The reading was slightly weaker than market expectations of 52.2 in a Reuters poll.

Despite Beijing’s sustained tightening campaign over the past half year to control higher prices, which has included increases in reserves required of banks and in interest rates, most economists say that the economy is retaining much of its momentum.

May was the 27th straight month in which the official P.M.I. stood above the threshold of 50, which demarcates expansion as opposed to contraction.

The input prices subindex, a measure of how much factories pay for raw materials and intermediary goods, eased to 60.3 in May, a 10-month low.

But easing factory prices may take some time to trickle down to consumer inflation, which is widely expected to quicken in May from a rate of 5.3 percent in April.

With inflation running at its fastest in nearly three years, analysts expect the government to press ahead with policy tightening in the coming months.

The new orders subindex weakened to 52.1 in May from 53.8 in April. Much of the drop was driven by slower growth in export orders, whose subindex dipped to 51.1 from 51.3 in April.

“The easing in P.M.I.’s is still manageable despite recent domestic and global factors,” said Connie Tse, an economist at Forecast in Singapore.

“However, the government will have to address the problem of power shortages soon, which will likely further weigh on industrial production,” she said.

Article source: http://www.nytimes.com/2011/06/02/business/global/02iht-yuan02.html?partner=rss&emc=rss

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