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China Manufacturing Shrinks For First Time In 3 Months


China's manufacturing activity declined in May for the first time in three months as new orders, employment and inventories shrunk, suggesting that the escalating trade tensions have started to hurt the sector.

The official Purchasing Managers Index, or PMI, for the manufacturing sector fell to 49.4 from 50.1 in April, survey data from the National Bureau of Statistics showed on Friday. Economists had forecast a score of 49.9.

A PMI reading below 50 suggests decline in activity in the sector. The latest reading was the weakest since February's 49.2.

Among the five sub-indexes of the factory PMI, those for production and supplier delivery time were above the neutral mark of 50, while those for new orders, raw material inventory and employment were below the mark, suggesting decline.

The new orders index dropped sharply to 49.8 from 51.4 and the export bookings measure slumped to 46.5 from 49.2. The export orders sub-index has been in the contraction territory since June 2018.

ING economist Iris Pang said concerns are not just limited to products affected by the tariffs, which could have a longer impact on both the Chinese and US economy unless trade negotiations resume.

"The technology war is brewing even faster in May 2019, and could continue for the rest of the year," Pang said.

"We expect the technology war to put pressure on manufacturing activity for the whole of 2019."

Meanwhile, the non-manufacturing PMI showed a reading of 54.3 for May, which was unchanged from April. That was in line with economists' expectations.

The survey found that growth in orders and prices slowed in May, but employment decreased. Business expectations eased slightly, but remained strong.

Within the non-manufacturing group, services sector growth strengthened in May with the relevant PMI climbing to 53.5. Transport and communication continued their rapid growth, while wholesale trade and financial services industries contracted.

Construction also sustained its robust growth in May though the corresponding PMI eased 1.5 basis points to 58.6.

The Composite PMI Output Index fell for a second straight month in May, easing to 53.3 from 53.4 in April.

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