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China's Manufacturing Sector Expands As Covid-19 Restrictions Ease

chinamanufacturing july01 01jun20 lt

China's manufacturing sector returned to expansion zone in May driven by the easing of restrictions related to the coronavirus, or Covid-19, pandemic, survey results from IHS Markit showed Monday.

The headline manufacturing Purchasing Managers' Index rose to 50.7 in May from 49.4 in April.

The latest score above 50.0 indicates a renewed improvement in overall operating conditions but the pace of expansion was only marginal.

It appears that growth has returned to the manufacturing sector, but new export orders and imports were still in contraction, ING economist Iris Pang, said. A recovery in manufacturing and employment in some sectors remains challenging.

According to official PMI survey, released over the weekend, the factory PMI dropped to 50.6 in May from 50.8 in April. Meanwhile, the non-manufacturing PMI advanced to 53.6 from 53.2.

Manufacturers reported an increase in output following a record fall in February, due to the resumption of work. The pace of growth was the fastest since January 2011.

However, total new work declined again as there was a historic fall in external demand in May.

A lack of new orders drove the first fall in backlogs of work since February 2016. At the same time, the resumption of production led to a renewed increase in buying activity.

The employment sub-index rebounded in May but it remained in negative territory.

Supply chains stabilized following severe disruptions in prior months due to restrictions related to the Covid-19 pandemic.

Manufacturers signaled a third successive monthly fall in average input costs, while factory gate prices were little-changed from the previous month.

Business confidence picked up in May, with firms generally optimistic that output will rise over the next year.

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