Factory activity slows in China, economic pressure mounts

BEIJING (AP) — China’s manufacturing slowdown worsened in May on weak consumer demand and exports, a survey showed Wednesday. The data added to other indications that the economic recovery after the withdrawal of measures against the coronavirus is losing strength.

Chinese authorities are under pressure to protect the recovery, after a survey showed a record one in five young urban workers was unemployed. Consumer spending in April was lower than expected and factory production fell from the previous month.

The Purchasing Managers’ Index (PMI), issued each month by the national statistics agency and an industry group, eased to 48.4 from 49.2 in April on a 100-point scale. Numbers below 50 imply that activity has fallen.

The decline “suggests that the risk of a downward spiral, especially in the manufacturing sector, is becoming more real,” Nomura economists said in a report. The PMI is likely to remain in negative territory in June, they noted.

Chinese manufacturers have been hurt by weak global demand after central banks in the United States, Europe and Asia raised interest rates to contain inflation.

At home, Chinese consumer spending rebounded after the December lifting of anti-virus restrictions on business and travel. But the recovery has been weaker than expected.

Economic growth accelerated to 4.5% from a year earlier in the three months ending in March, compared with 2.9% in the previous quarter. But growth will have to rise further to reach the annual target of “around 5%” set by the Communist Party, which rules the country.

The new orders indicator fell to 48.3 from 48.5 in April on a similar 100-point scale, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing. An index of export orders fell to 47.2 from 47.6 the previous month.

The survey suggested that “the Chinese economic recovery was still on track in May, albeit at a slower pace,” Capital Economics said in a report. “The industry is having problems and fiscal support for construction is being reduced. But the services sector continues registering acceptable increases”.