Manufacturing activity in China falls short of expectations

The official manufacturing PMI, prepared by the National Bureau of Statistics, fell to 48.8 in May, its lowest level in the last five months, from 49.2 in April. China’s manufacturing PMI came in at 48.8 in May, below the 50-mark that separates growth from contraction, and economists had expected the manufacturing PMI to rise to 49.4 in May. Morgan Stanley analysts said in a report dated May 17 that the weak manufacturing data was “a solid harbinger of policy easing.” “If growth fails to accelerate enough to narrow the output gap, the risk to social stability could increase and eventually trigger more meaningful stimulus,” the National Bureau of Statistics noted. The purchasing managers’ index for large manufacturers came in at 50, while that for small manufacturers was lower. The services activity index remained in expansion territory at 54.5, but marked a second consecutive month of decline.