Link Securities| China’s advance manufacturing activity index, the manufacturing PMI compiled by media group Caixin unexpectedly rose to 50.9 in May from 49.5 in April. The FactSet consensus of analysts had expected a lower reading of 49.4. An index reading above 50 points indicates expansion in activity from the previous month, while a reading below that level indicates contraction in activity. Production increased at its fastest pace in eleven months, while growth in new orders was at a two-year high, and foreign sales continued to rise. Meanwhile, purchasing activity expanded at its lowest level in four months and employment fell at its fastest pace since February 2020, with job openings declining for the first time in five months. Lead times were further reduced, as suppliers maintained sufficient stocks of products.
On the price front, input prices fell for the second consecutive month, supported by improving supply chains, and lower prices for metals, food, and fuel. However, retail prices declined solidly, due to increased intensity of market competition.
Finally, economic sentiment fell to seven-month lows, due to concerns about latent uncertainty, particularly foreign uncertainty. Current economic growth lacks domestic momentum and market entities lack sufficient confidence, highlighting the importance of demand recovery, said Dr Wang Zhe, an economist at Caixin.