After an extensive period of record-breaking results, China’s factory activity is beginning to lose steam.
In May, the important economic indicator came at 51.0, still above the critical threshold of 50 points, separating expansion from contraction. Such a result extends the lukewarm performance incurred in the previous month, where manufacturing PMI came at 51.1.
For the record, purchasing managers’ index is an important measure of the overall health of the manufacturing sector.
Even during the pandemic, China’s factory-related performance came out rather unaffected by the ongoing pandemic. This contrasts with the performance of its developed nations counterparts, where both manufacturing and services succumbed to the health crisis.
The biggest factor which brought the measure down is the rising input costs. Prices of raw materials spiked to the highest in more than 10 years.
In a brief context, prices of input jumped to more than 70 points during the same month. The reversal in trend particularly affects export-oriented firms and small to medium business enterprises.
New export orders for Chinese factories involved in outside trade fell to 48.3. This is a sharp discount from the 50.4 points notched in the month before the slack.
Given their minuscule sizes, these entities fail to take advantage of the economies of scale. The majority of the time, they could not cut output costs due to a restricted production level.
Analysts noted that there is an ongoing disproportion, in terms of recovery, among firms in the manufacturing industry. This proves to be true as larger-scale and state-owned businesses continue their path to the pre-pandemic level of operations without hurdles.
Economists are Pessimistic, Japan’s Factory Activity Update
Amid the ongoing slowdown, economists warned that the country might have made it past the peak of its recovery.
In a statement, one chief economist of a leading financial institution in Hong Kong noted that the pace of recovery in the world’s second-largest economy has slowed.
The policymaker gave a sure stance and said that China had made it past the peak. This will create a bigger uncertainty on the path that its economy will traverse in the year’s remaining months.
Meanwhile, Japan’s factory activity in April offered some relief among spectators in East Asia.
In data released by the country’s government on early Monday, factory output hiked by 2.5% compared to the March results. The hike, analysts believe, is due to lifting the state of emergency on March 21, which carried through until April.