- Annabel Fiddes, an economist at Markit
China's manufacturing activity declined for the third consecutive months in May as demand remained weak, fuelling expectations for more stimulus to support the growth in the world's second biggest economy. HSBC's preliminary manufacturing PMI came in at 49.1 for May. Even though the measure was slightly better than 48.9 in April, it remained in contractionary territory. The preliminary PMI figure is based on 85% to 90% of total responses to HSBC's survey each month, and is released about one week before the final PMI reading.
The production sub-index fell for the first time this year, underlining worsening operating conditions. The output sub-index dropped to the lowest level in 13 months of 48.4, while the employment sub-index showed manufacturers cut jobs for the 19 straight months. The data is the latest in a string of downbeat fundamentals from China, and reinforces the view that policy makers will step up further stimulus to reach its 7% growth target for 2015. The People's Bank of China has cut interest rates three times since November, and lowered the reserve requirement ratios, the cash banks must hold as reserves, twice. The measures aim to reduce companies' borrowing costs and boost lending. China's economy, struggling with a property downturn, soft domestic demand and volatile exports, expanded at a six-year low annual rate of 7% in the first quarter.
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