The official manufacturing purchasing managers’ index fell to 48.8 from 49.2 in April, according to data from the National Bureau of Statistics.
This is the index’s lowest level in five months and below the 50-point barrier that separates growth from contraction. The PMI missed expectations, rising to 49.4.
The services sector grew at the slowest pace in four months in May, with the official non-manufacturing purchasing managers’ index falling to 54.5 from 56.4 in April.
The readings pushed Asian markets lower, as the yuan and the Australian and New Zealand dollars fell and regional stocks fell sharply.
“The PMI data suggests that China could be heading for a choppy recovery,” said Bruce Pang, chief economist at Jones Lang LaSalle.
“Weak domestic demand could affect China’s sustainable growth if there are no effective policy measures for a broad recovery,” he added.
China’s economy is emerging from a three-year lockdown due to the Corona pandemic. PMI indices and other economic data from April add to the signs that the post-opening recovery is losing momentum.
Last month, imports contracted sharply, the producer price index (which measures the cost of goods leaving the factory) fell, property investment slumped, new bank lending plunged, industrial profits fell, and factory output and retail sales beat expectations.
As a result, Nomura and Barclays have lowered their Chinese GDP growth forecasts for 2023.
“The PMI data suggests that China could be heading for a K-shaped recovery,” said Bruce Pang, chief economist at Jones Lang LaSalle.
A recovery in the form of the Latin letter K is defined as the recovery of different sectors of the economy at different rates, times or amounts, after a recession, as opposed to a steady and uniform recovery across all sectors or industries.
“Proactive fiscal policies, interest rate cuts and targeted monetary policy tools as well as structural reforms will be key,” Pang added.
In order to stimulate credit growth, the central bank lowered the reserve requirement ratios of banks in March.
Meanwhile, Chinese Premier Li Qiang said more targeted measures were needed this month to boost demand, while China’s central bank said on May 15 it would provide “strong and stable” support. to the real economy.
“Sentiment in the financial market is quite bearish… It’s unclear how the government is interpreting the current economic situation,” said Zhiwei Zhang, chief economist at PinePoint Corporation Management.
“There is no indication of an imminent government response. The Chinese government may continue to take a ‘wait and see’ stance at this time,” he added.
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