Asia Economy
China's manufacturing contracted for third straight month in May; Japan in slight rise
By Michael Hennigan, Finfacts founder and editor
May 21, 2015 - 6:33 AM

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China's manufacturing sector contracted for a third straight month in May according to a "flash" PMI (purchasing managers' index). Meanwhile Japanese manufacturing returned to growth in the month.

The flash China Manufacturing PMI at 49.1 in May (48.9 in April) was at a two-month high while the flash China Manufacturing Output Index at 48.4 in May (50.0 in April) was a 13-month low. The 50 mark is the no-change level.

The HSBC Flash PMI is published on a monthly basis ahead of final PMI data. The estimate is typically based on approximately 85%¡V90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data. May final PMI data will be released on 1 June 2015.

Annabel Fiddes, economist at Markit, which compiles the survey, said: "The Flash China Manufacturing PMI pointed to a further deterioration in operating conditions in April, with production declining for the first time in 2015 so far. Moreover, softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the near term, as companies tempered production plans in line with weaker demand conditions. On a positive note, deflationary pressures remained relatively strong, with both input and output prices continuing to decline, leaving plenty of scope for the authorities to implement further stimulus measures if required."

Business confidence in China recovered slightly in May after falling to its lowest since early 2009, boosted by strong share performances and recent moves by the People's Bank of China to ease monetary policy.

The MNI China Business Indicator showed its first month-to-month rise since December, rising from 48.8 in April to 49.7 this month — but still negative.

MNI, is a unit of Deutsche Börse Group, which surveys 200 companies listed on the Shanghai and Shenzhen stock exchanges. It reported that the survey maybe a "tentative sign that the more pro-active policy stance from the authorities seen since the latter part of 2014 could be starting to have an impact."

In Japan the flash Japan Manufacturing PMI at 50.9 (49.9 in April) indicated a light improvement in operating conditions in May. Flash Japan Manufacturing Output Index at 51.7 (49.3 in April) showed production up at a moderate pace.

Amy Brownbill, economist at Markit, said: “Reflective of an overall improvement in operating conditions at Japanese manufacturers was a return to growth of both production and new orders in May. Moreover, the rates of expansion were faster than their respective long-term averages. Subsequently, employment rose at the quickest rate since December last year, while buying activity increased for the third time this year so far. “Meanwhile, input prices increased at the weakest rate in the current 29-month sequence of inflation, while charges stabilised, following a three-month period of decline.”

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