"The economy will wane again in the summer, and that will be a key test for the PBOC -- can it maintain stable policy and focus on supply-side management ".
-Tao Dong
China's official factory gauge stayed above the dividing line that signals improving conditions for a third month. The manufacturing purchasing managers index remained at 50.1 in May, barely above the 50-mark that separates expansion in activity from contraction on a monthly basis, matching April's level and compared with economists' median estimate of 50. Meanwhile, a similar survey showed activity in China's services sector continued to expand but at a slower pace, with the official reading at 53.1 in May versus 53.5 in April. Numbers above 50 indicate improving conditions. Despite activity in China's manufacturing sector unexpectedly expanded for the third straight month in May, growth still remains weak, suggesting the world's second-largest economy is still struggling to regain traction.
Meanwhile, manufacturing data showed that measures of output and purchases quantity rose, with small and medium-sized enterprises picking up. For the services gauge, declines in input prices and business activity expectations weighed on the index. Moreover, a separate PMI reading from Caixin Media and Markit Economics fell to 49.2 in May, matching economists' estimates and down from 49.4 in April. The lack of any pick-up in external trade underscores the economy's reliance on domestic industries.
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