China’s manufacturing growth slows to lowest in 10 months

Growth in China's manufacturing sector slowed to its lowest level in 10 months in May as expansion in both new orders and production eased, according to survey results from Markit Economics.
 
The results published today said the flash manufacturing purchasing managers' index was down at 51.1 from 51.8 in April. A PMI reading over 50 indicates expansion of the sector, while a reading less than 50 suggests contraction.
 
Commenting on the data, HSBC chief economist Hongbin Qu said that there was no need to worry about a hard landing since the current level of the PMI was still consistent with around 13 per cent industrial production and 9 per cent GDP growth.
 
Expansion in new orders happened at a slower pace through the month, while new export orders suffered a contraction. Meanwhile, employment continued to grow at a steady pace.
 
The manufacturing output index also fell to a 10 month low in May, down at 50.9 from 51.8 in April. Production growth fell for the second successive month.
 
Both output and input price inflation slowed during the month, which is seen as an indication that the central bank's policy tightening was working. Qu noted that policy focus was still towards reining inflation. He expects Beijing's tightening policy to continue in the coming months.
 
On 12 May, the central bank upped the banks' reserve requirement for the fifth time this year, in an additional step in fighting inflation, which is currently a major policy concern for China.

According to data the government released earlier this month, industrial production remained subdued, rising by 13.4 per cent annually in April, slower than the 14.8 per cent gain in March. Production rose by just 0.93 per cent over the previous month.
 
The Chinese economy grew at a faster-than-expected rate of 9.7 per cent year-on-year in the first quarter after the 9.8 per cent growth in the fourth quarter of 2010.