China manufacturing improves in May from April: HSBC
June 4, 2014, 12:00 am TWN
BEIJING/WASHINGTON--China's manufacturing activity improved in May but the world's second-largest economy faces headwinds, particularly in the property sector, HSBC said Tuesday.
The HSBC final purchasing managers' index (PMI), which tracks activity in the nation's factories and workshops, came in at 49.4 in May, lower than a preliminary reading of 49.7, the British-based banking giant said in a statement.
But the figure improved from 48.1 in April and was the highest reading since January's 49.5, the bank's data showed.
The index is a closely watched indicator of the health of the economy. A reading above 50 indicates expansion.
The May result marked the fifth consecutive month that the manufacturing industry contracted, according to the survey.
"The final PMI reading for May confirmed that the economy is stabilizing, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector," Qu Hongbin, HSBC's economist in Hong Kong, said in a statement.
Home prices in major Chinese cities posted their first monthly decline in nearly two years in May, according to the China Index Academy, the research unit of real estate website operator Soufun, providing new evidence the once red-hot market is losing steam.
China's property sector is a key driver of economic growth.
"The lack of a sustainable growth momentum warrants stronger policy support," Qu said, adding that he expects the government to relax its monetary and fiscal policy gradually over the coming months.
China on Friday signaled it will further ease monetary policy to support the economy by cutting the amount of funds that some banks must hold in reserve, a sign officials are concerned.
The State Council, China's cabinet, announced that it would trim reserve requirements for banks which lend to the agricultural sector and small enterprises.
ISM Data Error Sinks Stocks; US PMI actually rose
U.S. stock markets rebounded from an early sharp fall Monday after the Institute of Supply Management said a software error caused it to report a slowdown in U.S. manufacturing activity.
The ISM corrected the data to show an acceleration in the sector in May, its purchasing managers index rising to 55.4 from 54.9 the previous month, rather than slowing to 53.2 as it first reported.
The first PMI release, suggesting the economy sagged in May, sent U.S. stocks tumbling before economists began questioning the data and, some time later, ISM economist Bradley Holcomb told business news television that there had been an error.
The markets recovered, and hours later ISM released a formal statement with an official correction.
"We apologize for this error. We have recalculated and confirmed that the actual index indicates that the economy is accelerating," Holcomb said in the statement.
ISM, an industry research group and forum, blamed "an error in its software programming."