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Chinese Manufacturing Remains at Subdued Levels

Chinese Manufacturing Remains at Subdued Levels
Jun 01, 2015 By Matthew Dibb

China’s manufacturing activity has risen to a 6-month high in May, but still remains at subdued levels. The official Purchasing Managers’ Index (PMI) released by the National Bureau of Statistics (NBS) in China was at 50.2 points in May, the best performing month since reaching 50.3 points in November of last year. The index tracks factory and workshop activity and is used as an indicator of China’s economic health. The 50-point index value is the barrier between growth and contraction.

According to Chinese data, May signals the third consecutive month that Chinese manufacturing has experienced growth. However, the PMI remains at subdued levels. Zhao Qinghe, senior analyst with China’s NBS, warned that the manufacturing industry still faces significant headwinds, saying the index was still at “relatively low levels” and that the sector is facing downward pressure. “The survey result showed that companies are still beset with strapped finances, insufficient market demand and rising labour costs,” he said. The sub-index of production increased to 52.9 points in May, according to official Chinese data.

The continued downward trend of the Chinese economy has many analysts and economists questioning official Chinese data. A separate survey by the British bank HSBC showed a different set of data. The HSBC-Markit Purchasing Managers’ Index came in at 49.2 points in May, which indicates contraction rather than growth. “The headline PMI signalled a further deterioration in the health of China's manufacturing sector in May," said Market economist Annabel Fiddes. She went further to say that the downward trend in Chinese manufacturing was attributable to softer demand, falling output, sustained job cuts, ongoing destocking activities and reduced overall activity.

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Matthew Dibb Author: Matthew Dibb Jun 01, 2015

Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.

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