China official PMI hits 5-month high in May, boding well for Q2

Jun 01 2014, 10:17 IST
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May official PMI at 50.8, a 5-month high May official PMI at 50.8, a 5-month high
SummaryNew orders grew fastest since last November

China's factory activity expanded at the fastest pace in five months in May due to rising new orders, official data showed on Sunday, reinforcing views that the world's second-largest economy is regaining momentum in the second quarter following Beijing's targeted measures to bolster growth.

The official Purchasing Managers' Index rose to 50.8 in May from April's 50.4, the National Bureau of Statistics said on Sunday, beating market expectations of 50.6.

"The PMI reading continued to improve in May, indicating that a trend of economic stabilization is becoming more evident," Zhang Liqun, a researcher at the Development Research Centre said in the statement accompanying the data.

As one of the first leading indicators gauging economic momentum, the improved reading could bode well for other May data, bolstering market expectations that the economy is regaining some strength as the government's pro-growth measures started to kick in.

The official survey showed a broad-based recovery in manufacturing activity in May, with nine out of the 13 sub-indicies pointing to improvement from the previous month.

A sub-index for new orders, a measure of foreign and domestic demand edged up to 52.3 in May from 51.2 in April, marking the highest level since last November.

The PMI data also showed export orders inched higher to 49.3 in May from 49.1 in April, though the indicator remained below the 50-level threshold that separates growth from contraction.


Beijing stepped up policy fine-tuning in recent weeks and has unveiled a slew of targeted measures this year to help shore up the economy, which has dipped to a 18-month low in the first quarter and is seen on track to post the weakest annual showing in 24 years.

"It is clear that the government has become more concerned about the continued economic slowdown and wants to further increase the strength of policy support," said Wang Tao, economist at UBS in a note to clients.

China's cabinet announced fresh easing measures on Friday to help lower funding costs and reduce operating burdens for companies to give more support for the real economy.

The measures included lowering the reserve requirement for more banks, increasing the scale of re-lending and bond financing to support smaller firms, and a further reduction of administrative fees for businesses.

China's finance ministry had also urged their local branches to quicken the pace of budget allocation to guarantee the completion of key projects and lift the slowing economy.

Those policy moves, together with the earlier steps, such as hastening

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