China’s manufacturing sector showed scant signs of picking up in May as demand stayed stubbornly weak, while exports in South Korea suffered their biggest annual drop since the global financial crisis, grim readings which prompted calls for bolder stimulus measures.
Japanese manufacturers, however, saw a rebound in new orders while Indian factories enjoyed solid domestic demand, offering a glimmer of hope for a region struggling to gain traction in the second quarter.
The focus now shifts to the United States and parts of Europe, where hopes are pinned on stronger factory activity to offset the global downdraft from China. ECONEZECONUS
China reported on Monday its official manufacturing Purchasing Managers’ Index (PMI) edged up to 50.2 in May, from 50.1 in April and creeping back into expansion territory.
But a private survey focusing on small and mid-sized firms showed their activity had contracted for a third straight month. The final HSBC/Markit PMI stood at 49.2.
Both indexes are hovering around the 50 level that is supposed to mark the threshold between contraction and expansion, pointing to very subdued activity at best. And both showed a further contraction in export orders were prompting factories to shed more workers.
A separate survey showed growth in China’s services industry cooled in May, with the non-manufacturing PMI slipping to 53.2, from 53.4. Services have been the lone bright spot in the economy.
“Overall, in our view, there are not yet convincing signs of near-term stabilization in the economy,” analysts at Barclays wrote in a note to clients.
“We believe risks to the outlook remain to the downside, with the property market correction and government-led infrastructure projects holding the key for the outlook.”
Indeed, the result is unlikely to cheer Beijing, which has already cut interest rates three times in six months and is widely expected to ease policy further in coming months.
“Five months into 2015, the economy sees little sign of a pick-up,” HSBC economists said. “We forecast more aggressive policy easing, including a 50-basis-point reserve ratio cut in the coming weeks.”