China's PMI hits 5-month high, pointing to stabilizing economy

Growth in China's manufacturing sector continued to accelerate in May, hitting a five-month high and adding to signs of a stabilizing economy, official data showed on Sunday.

The purchasing managers' index (PMI) increased to 50.8 in May from 50.4 in April, according to data released by the China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics (NBS).

FACTORY ACTIVITY PICKUP

The reading, which inched further above the 50-point level marking monthly expansion in factory activity, indicated a pickup in China's manufacturing sector and the economy as a whole.

This is the third consecutive monthly uptick in the widely watched data. The index, seen as one of the key indicators of economic performance, began to climb in March after three months of declines.

Zhang Liqun, a researcher at the Development Research Center (DRC) of the State Council, pointed to the improving data as an indication that "The economy continued to stabilize, and this trend is becoming evident."

Eight of the 12 sub-indices in the PMI registered growth, with the sub-index for production edging up 0.3 to 52.8 after dipping 0.2 in the previous month, according to the NBS and the CFLP.

The sub-index for new orders, seen by analysts as the most important of all sub-indices, jumped by 1.1 to 52.3 in May after gaining 0.6 in April.

The sub-index for export orders, which slumped by 1.1 in April, reversed the declining trend and rose by 0.2 to 49.3.

The employment sub-index of the PMI dipped to 48.2 from April's 48.3, pointing to contraction in the job market.

The data came as a boon to the world's second-largest economy, which had seemed to be losing steam in the past few months.

China's economy grew at its weakest pace in 18 months in the first quarter, expanding by 7.4 percent, lower than the 7.5-percent growth rate target set by the central government earlier this year.

Cai Jin, deputy head of CFLP, said that the continuous rising PMI is a reflection of the positive changes in the Chinese economy.

In an interview with Xinhua, Cai pointed to the remarkable improvement in the sub-index for new orders, reflecting foreign and domestic demand, as an indication of a firm foundation for steady growth.

The official reading is also broadly in line with the HSBC/Markit PMI figure, released in late May, which rebounded sharply to 49.7 in May, hitting a five-month high.

TARGETED MEASURES SHOWING EFFECTS

After clocking double-digit growth rates on average over the last three decades, the Chinese economy has decelerated in the past couple of years. Apart from the improvements in the PMI, other economic data, including investment, industrial output and consumption, have mostly underwhelmed.

As one of the first leading indicators showing economic momentum, the PMI reading could bode well for the second quarter, when the economy is expected to regain some lost ground.