China’s factory activities unexpectedly slipped back into contraction, non-manufacturing activities contracted at slower pace

China’s factory activity slipped back into contraction in May after two months’ expansion as market demand weakened.

The official manufacturing purchasing managers’ index (PMI) for May came in at 49.5, according to data released by the National Bureau of Statistics (NBS) on Friday, compared to 50.4 in the previous month and lower than 50.1 expected by analysts in a Reuters’ poll.

The sub-indexes for production and suppliers’ delivery time remained in expansion, while those for new orders, raw material inventory and employment were in the contractionary territory. 

The sub-index for production fell by 2.1 percentage point to 50.8 in May, remaining in the expansionary territory and indicating that manufacturers continued to expand production, while the sub-index for new orders fell 1.5 percentage points to 49.6, showing. that market demand weakened.

The manufacturing PMI for large companies rose 0.4 percentage point to 50.7 in May, while that for small- and medium-sized firms fell 3.6 percentage points and 1.3 percentage points to 46.7 and 49.4, respectively, the data showed.

The data also showed that China’s non-manufacturing activities expanded at a slightly slower pace in May, with non-manufacturing PMI coming in at 51.1, compared to 51.2 in the previous month and 51.5 expected by analysts.

In breakdown, the index for construction activities reached 54.4 in May, falling by 1.9 percentage points from the previous month, while the index for service activities reached 50.5, rising by 0.2 percentage point, showed the data. 

By sector, the indexes for the postal services; telecommunications, radio and television broadcasting and satellite transmission services; internet, software and information technology services; culture, sports and entertainment services, etc, were above 55, while the indexes for capital market services and real estate industries were lower than 50, showed the data.

The composite PMI, which includes both the manufacturing and non-manufacturing sectors, fell 0.7 point to 51 in May from April, showing that the overall production and business activities of Chinese companies continued their path on the recovery and development trend, the NBS noted.