China manufacturing PMI down lower than expected

China's economy showed signs of a widening slowdown as surveys of its vast factory sector showed momentum dropped in May, signalling a deeper-than-forecast deterioration in demand at home and abroad as also the possibility of further policy easing.

The official purchasing managers' index - covering China's biggest, mainly state-backed firms was down lower than expected to 50.4 in May, the weakest of the year and down from April's 13-month high, with output at its lowest since November 2011.

The HSBC China manufacturing PMI, tracking smaller private sector firms, slid to 48.4 from 49.3 in April - its seventh straight month below the 50-mark that separated expansion from contraction. The employment sub-index also fell to 48.1, its lowest level since March 2009.

"Growth in Q2 is likely to slow, probably below 7.5 per cent year-on-year. That puts the annual growth target at risk and the risks continue to increase because the external environment is weakening," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, told Reuters.

"The government will still try to get by with targetted, selective measures like the cash for clunkers programme, but we will get more monetary measures as well."

The weakening of both index readings at a headline level has left investors worried as they have been looking to China the biggest single provider of growth in the global economy - to pick up the slack, with economic headwinds growing stronger around the world.