Factory activity in China took a big hit as official data showed that the industry expanded at a slower pace in May as the country attempts to get back on track after the coronavirus.
China’s factories have stirred back to life after the lifting of strict lockdown measures imposed when the virus surfaced in Wuhan, but the spread of coronavirus worldwide has dragged down key foreign markets – weighing heavily on Chinese exports.
The Purchasing Managers’ Index (PMI), a key gauge of activity in China’s factories, was at 50.6 points in May, remaining above the 50-point mark separating growth from contraction each month.
But the figure was down slightly from 50.8 the month before, and 52.0 in March, according to the National Bureau of Statistics (NBS).
“The epidemic situation and economic situation globally remain severe and complex, and foreign market demand is still shrinking,” NBS senior statistician Zhao Qinghe said pointing to weakness in China’s imports and exports.
Zhao said indexes on new export orders and imports remained at relatively low levels.
The momentum of economic recovery is steady and improving, but there is weakness in some industries such as textiles and apparel,” Zhao added.
Non-manufacturing PMI was at 53.6 in May, a slight increase from the month before, with the NBS flagging that the construction and service industries are showing signs of recovery.
Business activity in the cultural, sports and entertainment industry, however, remains low with many entertainment venues still closed amid fears of a second wave of COVID-19 infections.
Nomura analysts said that “with economic growth in the major economies of Europe and the Americas set to drop by around 15 per cent year-on-year in the second quarter, China’s exports seem poised to fall”.
They added that even with exports of coronavirus-related medical supplies providing a boost in recent weeks, this is not likely to offset external challenges.
It is also likely to be “unsustainable” as new cases peak and more countries ramp up their own production of goods, they said.