China's PMI may ease to 10-month low
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China's manufacturing activities may ease for a second month in May, according to a preliminary reading for the HSBC Purchasing Managers' Index yesterday.
The HSBC Flash China Manufacturing PMI stood at 51.1 in May, a 10-month low and down from April's HSBC PMI of 51.8.
The flash data are published about one week before the final PMI data are released. The estimate is based on more than 85 percent of total PMI survey responses and aims at providing a fairly accurate indication of the final PMI.
A reading above 50 points to expansion, while a reading below 50 means contraction.
"Manufacturers continued to reduce inventories amidst slowing new business flows, leading to slower production growth at a 10-month low," said Qu Hongbin, chief economist for China at HSBC. "But we think there is no need to worry about a hard landing because the current level of the PMI is still consistent with around 13 percent industrial production growth and 9 percent gross domestic product growth."
Qu said the policy focus should still be on taming inflation, and he expected China's tightening policies to continue indefinitely.
China's GDP expanded 9.7 percent from a year earlier in the first three months. The consumer price index, the main gauge of inflation, rose 5.3 percent in April, close to a 32-month high of 5.4 percent in March.
To curb inflation, China has lifted interest rates twice this year, together with five hikes of reserve requirement ratio that forced banks to set aside more money as reserves.
Industrial production gained 13.4 percent annually in April, 1.4 percentage points lower than March's.
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