China Factory Activity Falls at Slower Pace as Covid Curbs Ease

(Bloomberg) -- China's factory activity in May contracted from the previous month as both production and new orders fell, although the slowdown wasn't as fast as in April, a private gauge showed Wednesday.

The Caixin Manufacturing Purchasing Managers' Index rose to 48.1 last month from April's 46 -- still below 50, the dividing line that separates expansion from contraction, Caixin and S&P Global said in a statement. That was worse than the marginal improvement to 49 that economists had expected in a Bloomberg survey.

Total new orders fell for a third month, though at a reduced rate, according to the statement.

The data indicated that “weaker foreign demand was a key factor weighing on new business,” the statement said, as export orders continued to fall markedly, which some firms linked to difficulties in shipping items to clients.

The data follows the release of the official PMI earlier this week, which also showed a slower pace of contraction in business activity from the previous month as the country started to ease up on tough lockdowns. The Caixin index surveys mainly smaller and private companies, while the official manufacturing PMI mostly covers larger, state-owned enterprises.

Both sets of data suggest China's economy may start rebounding as Shanghai lifts its lockdown and as Beijing eases some restrictions, although the process of recovery may be a gradual one.

“Overall, activity in the manufacturing sector improved in May, but stayed in contractionary territory as local Covid outbreaks continued,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data, adding that policymakers need to pay attention to “employment and logistics,” as removing obstacles in supply and industrial chains and promoting the resumption of work will help with stability and the protection of the labor market.

Beijing last week announced 33 policies to support the economy, and asked local governments to act decisively to stabilize growth.

More stories like this are available on bloomberg.com