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China recovery faltering as factory activity shrinks

By Frank Prenesti

Date: Wednesday 31 May 2023

(Sharecast News) - Further signs that China's economic recover was stuttering emerged on Wednesday as data showed factory activity falling faster than expected, driven by weaker demand.

The official manufacturing purchasing managers' index (PMI) fell to a five-month low of 48.8, the National Bureau of Statistics (NBS) said on Wednesday, down from 49.2 in April and missing forecasts for an increase to 49.4.

A mark below 50 indicates contraction. The non-manufacturing gauge fell to 54.5 from 56.4, while the new-orders sub-index fell to 48.3 in May from 48.8 in April, and the new-export-orders sub-index fell to 47.2 from 47.6.

"The Chinese recovery is faltering, especially the industrial sector, as China decided to allow a rebound in consumption to be the main driver of the reopening rebound, while holding off from broad stimulus," said Pantheon Macroeconomics.

"China's ebbing industrial sector activity means diminished demand for inputs and raw materials, including from overseas. This reinforces our view that China will export disinflation, even deflation, to the world this year. Large enterprises are still treading water, with a 0.7 points rise to 50.0, contrasting with the 1.6 points drop to 47.6 for medium-sized enterprises and 1.1 points decline to 47.9 for small enterprises."

Reporting by Frank Prenesti for

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