China Flash HSBC Factory PMI Lower in May

Chinese factory activity contracted for a third month in May and output shrank at the fastest rate in just over a year, a private survey showed, indicating persistent weakness in the world’s second-largest economy that requires increased policy support. The poor reading, which followed a raft of downbeat April data, reinforced analysts’ views that Beijing has to take bolder steps to combat a protracted slowdown, as growth threatens to drop below 7 percent for the first time since the global financial crisis.

“The subdued flash PMI print suggests there is no clear sign of near-term stabilization in the economy. Risks to the outlook remain to the downside,” Barclays economist Shengzu Wang said in a research note. The preliminary HSBC/Markit Purchasing Managers’ Index (PMI) fell to 49.1 in May, below the 50-point level that separates growth in activity from a contraction on a monthly basis.

Economists polled by Reuters had forecast a reading of 49.3, slightly stronger than April’s final reading 48.9. After a brief rebound in February, the index has now been back in negative territory for three consecutive months.