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Financial News: China's Manufacturing Sector Contracts For First Time In

China's Manufacturing Sector Contracts For First Time In 11 Months

06/01/2017 - 03:32:00 (RTTNews)

(RTTNews) - China's manufacturing sector contracted for the first time in nearly a year in May, survey data from IHS Markit showed Thursday.

The Caixin factory Purchasing Managers' Index fell to 49.6 in May from 50.3 in April. The reading declined below 50 for the first time in eleven months, signaling a contraction in the sector.

Chinese manufacturers reported a further rise in production in May. That said, the pace of expansion was the weakest in the current 11-month sequence and only slight. Furthermore, growth in new order books was the slowest seen since the current upturn began in July 2016 as demand was relatively subdued at home and overseas.

Meanwhile, confidence towards the year-ahead remained weaker than the historical average, with the degree of optimism unchanged from April's four-month low.

Employment continued on a downward trend in May. The workforce number declined at the quickest pace since late September, survey showed.

Manufacturers lowered their purchasing activity for the first time in 11 months in May, while average delivery times continued to lengthen.

Manufacturing companies reported the first decline in average cost burdens for nearly a year in May. At the same time, firms generally passed on any savings to clients, by cutting their output charges for the first time since February 2016.

"China's manufacturing sector has come under greater pressure in May and the economy is clearly on a downward trajectory," Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, said.

Data from the China Federation of Logistics and Purchasing, and the National Bureau of Statistics, early this week showed that the official manufacturing PMI held steady at 51.2 in May.

The upshot is that today's PMI reading points to growth having slowed more rapidly last month than the official PMI initially suggested, Julian Evans-Pritchard, an economist at Capital Economics, said.

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