China’s PMI falls to 5-month low, raising concerns over post-pandemic recovery
China's official Manufacturing Purchasing Managers' Index (PMI) fell to 48.8 in May, its lowest in five months and below market expectations of 49.4. This is the second consecutive month that the reading has fallen below the 50-point mark that separates expansion from contraction. The non-manufacturing PMI also fell to 54.5 in May from 56.4 in April. However, two surveys suggest that China's manufacturing sector improved or at least stabilized in May compared to the previous month. US-based data provider, China Beige Book, reported that manufacturing output increased notably in May from April, as did domestic and foreign orders. Similarly, Goldman Sachs Group Inc. cited a pick-up in the purchasing managers' index for emerging industries.
The result of the PMI was also below the 49.7 expected by economists surveyed by The Wall Street Journal. Both revenue and profit margins for Chinese manufacturers, as well as the service and retail sectors, increased in May from the previous month, according to China Beige Book's survey of about 1,000 Chinese firms conducted between May 18-25.
This news comes as a warning sign for the post-pandemic recovery of China's economy. The PMI's contraction indicates a decline in manufacturing activity, which could lead to a decrease in employment opportunities and a slowdown in economic growth. However, the surveys suggesting stabilization in the manufacturing sector provide some respite for the Chinese economy.
Investors should exercise caution when trading in response to this news, as foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure, and investors should carefully consider their investment objectives, experience level, and risk tolerance before trading foreign exchange. Losses can exceed deposits, and seeking advice from an independent financial or tax advisor is recommended before trading.
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