China’s factory activity likely contracts in May – Reuters poll

BEIJING (Reuters) – China’s factory activity likely contracted further in May, a Reuters poll showed on Monday, adding to pressures facing the world second-biggest economy amid an uneven economic recovery from the COVID-19 pandemic.

The official manufacturing purchasing managers’ index (PMI) is expected to rise to 49.4 in May from 49.2 in April, according to the median forecast in a Reuters poll.

An index reading above 50 indicates expansion in activity on a monthly basis and a reading below indicates contraction.

China’s economy is recovering from three years of stringent COVID curbs, growing 4.5% in the first quarter.

April data, however, suggested momentum was weakening. Imports contracted sharply, factory gate prices fell again, property investment slumped further and industrial output and retail sales missed forecasts.

“Underlying growth momentum appears weak in May, as both the steel production data and our commodity team’s channel check suggest sluggish activity growth in the upstream manufacturing sector in May,” Goldman Sachs (NYSE:) said in a research note.

Dalian iron ore futures slid to the lowest in nearly six months last week on expectation that China’s demand for the steelmaking ingredient would remain sluggish during the usual summer lull in construction.

China will take more targeted measures to expand domestic demand and stabilise external demand in an effort to promote a sustained economic rebound, Premier Li Qiang was quoted saying on May 18.

The official manufacturing PMI, which largely focuses on big and state-owned firms, and a survey for the services sector, will be released on Wednesday.

(Polling by Sujith Pai and Devayani Sathyan; Reporting by Liangping Gao and Ryan Woo; Editing by Robert Birsel)

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