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QINGDAO TODAY
在线翻译:
szdaily -> Business -> 
Factory activity slumps into deeper contraction
    2019-06-03  08:53    Shenzhen Daily

THE country’s factory activity in May slumped into a deeper contraction than markets had expected, heaping pressure on policymakers to roll out more stimulus to support an economy hit by a trade war with the United States.

Friday’s weak manufacturing readings, which follow a recent raft of soft data across the retail, export and construction sectors, could inflame concerns about the risk of a global recession and push more central banks to adopt an accommodative monetary stance.

The official Purchasing Managers’ Index (PMI) fell to 49.4 in May from 50.1 in April, data from the national statistics bureau showed. Analysts surveyed previously had forecast the PMI to be down a notch at 49.9, below the 50-point mark separates expansion from contraction on a monthly basis.

Factory output expanded at a slower pace as new orders — a gauge of domestic and foreign demand — fell for the first time in four months. Export orders extended their decline for the 12th straight month with the sub-index pulling back significantly to 46.5 from April’s 49.2, suggesting a further weakening in global demand.

“Export orders dropped back particularly sharply, which suggests that Trump’s latest tariff hike may already be undermining foreign demand,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

While China’s exporters are feeling the pinch, Friday’s data showed import orders also contracted at a quicker pace, reflecting softening demand at home despite a flurry of growth-supporting measures that were rolled out earlier this year.

Some economists believe more stimulus is needed, likely through further cuts in the amount of cash banks hold as reserves and fiscal spending.

The downbeat data reflects insufficient demand that has become a “more prominent problem” and adds urgency for the government to intervene, said Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing (CFLP).

Central bank Governor Yi Gang, however, has suggested the room for further monetary easing had become more limited, while economists also expressed concerns about rising debt risks.

Zhang said that the government should focus on boosting domestic demand and improving “the ability to cope with fluctuations in external demand as soon as possible.”

On the brighter side, despite the pronounced weakness in the manufacturing sector, China’s services industry showed solid expansion. Another survey released by the statistics bureau Friday showed the official non-manufacturing Purchasing Managers’ Index (PMI) held steady at 54.3 in May, unchanged from April.

The official May composite PMI, which covers both manufacturing and services activity, slipped to 53.3 from April’s 53.4.(SD-Agencies)

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