China's May factory activity cools as weak demand curbs output

reuters.com General 2020-06-01 09:01:20

China's factory activity grew at a slower pace in May but momentum in the services and construction sectors quickened, pointing to an uneven recovery in the world's second-largest economy as businesses emerge from coronavirus-led shutdowns.


Manufacturing slowed for a second month although activity has revived from record lows in February, when the government imposed tough travel restrictions, quarantine rules and factory suspensions to curb the spread of the respiratory illness.


The official manufacturing Purchasing Manager's Index (PMI) eased to 50.6 in May from 50.8 in April, National Bureau of Statistics data showed on May 31, but held above the 50-point mark that separates expansion from contraction on a monthly basis. Analysts had expected a PMI reading of 51.


Export orders logged the fifth consecutive month of contraction, with a sub-index standing at 35.3 in May, well below the 50-point mark, as the coronavirus pandemic continued to take a toll on global demand.


"Judging by the PMI sub-indices, the absolute levels of demand-related indices are way below the production-related ones, indicating a pronounced constraining impact from demand on production," said Zhang Liqun, an analyst with the China Federation of Logistics and Purchasing (CFLP), adding that more than 50% of companies have reported a lack of demand.


Factories reduced headcount for the first time since they reopened, with a sub-index falling to 49.4 from 50.2 in April, the survey showed.


In May, the PMI index for medium-sized and small enterprises fell to 48.8 and 50.8, respectively, while large companies reported a faster expansion in activity.


In an encouraging sign, the forward-looking total new orders gauge showed an improvement to 50.9 from April's 50.2, suggesting domestic demand could be picking up soon.


"In the near term, we expect monetary policy to continue the 'volume' of credit expansion in order to stabilise growth and help fiscal expansion. In this regard, China's domestic demand will likely continue to rebound," analysts with investment bank CICC said in a note after the data release.


Hammered by the health crisis, China's economy shrank 6.8% in the first quarter from a year earlier, the first contraction since quarterly records began. Analysts believe it will be months before broader activity returns to pre-crisis levels, even if a fresh wave of infections can be avoided.


While most businesses have reopened, many manufacturers are struggling with reduced or cancelled overseas orders as lockdowns push the global economy into recession. Domestic demand also remains depressed amid increased job losses and worries about a second wave of infections.


Zhao Qinghe, an official with the NBS, said more than 80% of factories have resumed production to 80% of levels prior to the coronavirus outbreak. However, indexes for imports and exports were at record lows as global demand continues to shrink.


Highlighting the uncertain outlook, the government's work report earlier this month did not set an annual growth goal, the first time China has not set a target since 2002.


But Beijing announced additional fiscal measures to bolster its economy, equal to about 4.1% of GDP, according to Reuters calculations, its largest stimulus package since the global financial crisis.


Higher spending, particularly on infrastructure, is expected to give activity a solid boost in the second half of the year and into 2021. A sub-index for construction activity rose to 60.8 in May from 59.7 the previous month, a separate survey on non-manufacturing activity showed, pointing to an accelerating pick-up in a sector that Beijing is counting on to boost growth.


New orders for the construction sector rose to 58, compared with 53.2 the previous month, while companies also added headcount at a faster clip.


The official non-manufacturing PMI rose to 53.6 in May, from 53.2 in April, suggesting the sector's business and consumer confidence may slowly be improving.


(Writing by Jessie Jia  Editing by Alex Guo)
For any questions, please contact us by inquiry@fwenergy.com or +86-351-7219322.

Share this article
Connect with us

Editors Recommendations

1 China Coal Daily Track (Jul 8) 2020-07-08

Thermal coal Production area Coal supply remained tight in Shaanxi and Inner Mongolia. While the number of trucks waiting outside mining fields fell slightly, the overall demand for slack coals

2 Huaneng says to strictly control spot purchases of domestic thermal coal 2020-07-08

China's state-owned power giant Huaneng Group said in a notice issued on July 7 that it will tighten the screw on spot purchases of domestic thermal coal, given the benchmark price has been rising rap

3 Chinese thermal coal market climb fast on robust demand 2020-07-07

Chinese thermal coal prices continued growing at a fast pace at northern transfer ports, as utilities are frequently issuing tenders for the summer peak demand period. On July 7, offer pr

4 China coking coal buying interest tapers after coke prices fall 2020-07-07

Chinese coke producers started to diminish coking coal procurement after several leading steelmakers lowered purchasing prices of coke, signaling an end of consecutive rises in the coke sector since e

5 Indonesian thermal coal demand weakens in SE Asia markets after China, India 2020-07-07

Thermal coal of Indonesia, a major global supplier, seems to be losing its emerging Southeast Asia markets after top buyers China and India shifted to domestic supply amid Covid-19 pandemic woes.

6 China Coal Daily Track (Jul 7) 2020-07-07

Thermal coal Production area Both supply and demand have improved in Inner Mongolia and other key production areas since the start of this month In Inner Mongolia, coa

7 China's 2020 power demand to gain over 1.5%: analysis report 2020-07-07

China's power consumption is expected to reach 7.33-7.48 trillion kilowatt hour (KWh) in 2020, an increase of 1.5% to 3.5% from 2019's consumption, factoring in coronavirus, financial policies, the sw

8 China steel plates strong while rebar weak in late Jun 2020-07-07

As the rainy season in southern China restricted the demand for construction steel, rebar and wire rod prices ran weak in late June, according to the latest data from the National Bureau of Statistics

9 Myanmar becomes top market for Chinese cos to track power projects in H1 2020-07-07

Out of 144 overseas power projects Chinese companies participated in over the first half of 2020, 27 projects are located in Myanmar, accounting for 18.8% of total, making the southeastern Asian count

10 Huadian Coal Industry H1 profits rise 23% YoY 2020-07-07

Despite hardships and headwinds due to the outbreak of COVID-19 in China, Huadian Coal Industry under China Huadian Corporation has achieved encouraging results in the first half of 2020, according to

Most Read Articles

1 CHN Energy Jul term contract prices reach new high so far this yr 2020-07-02

China's top coal mining group China Energy Investment Corporation, or CHN Energy, raised its monthly term contract prices of thermal coal for July delivery to a new high so far this year, market sourc

2 China coal mine safety watchdog warns of possible floods at mines 2020-07-03

China's National Coal Mine Safety Administration warned of possible floods at coal mines alongside persistently strong rainfalls in South China and Southwest China. Entering the rainy sea

3 Indonesia sets Jul coal HBA price at lowest in 4 yrs 2020-07-03

The Indonesian government set its coal benchmark price (HBA) for July at $52.16/t, down from $52.98/t last month, the Energy and Mineral Resources Ministry said in a statement on July 3.

4 China's thermal coal prices climb quickly on bullish outlook 2020-07-03

Thermal coal prices moved up rapidly at northern Chinese ports late this week, on the back of revived market confidence for higher buying demand and tight supply. Prevailing offers for 0.

5 Customs authorities suspend coking coal clearing at N port on quota shortage 2020-07-02

Chinese customs temporarily stopped customs clearing services for coking coal imports at Jingtang port in northern China's Hebei province, as its quotas for the whole 2020 have been almost used up, so

6 Chinese steel market bracing for slack demand season 2020-07-02

Chinese steel market is bracing for typically slack demand season, alongside rising steel stockpiles and slightly contracted demand, said Ge Xin, vice director of Lange Steel Research Center.

7 Indonesian low-CV coal prices fall below $24/t; downward pressure remains 2020-07-03

Offer prices of Indonesian thermal coal prices nudged lower on July 3 in the Chinese seaborne import market due to the poor demand curbed by a lack of import quotas. Market participants surmised the d

8 Japan seeks to suspend or retire 90% of dirty coal-fired plants 2020-07-02

The Japanese government is looking to suspend or shutter nearly 90% of its older, inefficient coal-fired power plants by fiscal year 2030 in what would be a major turning point for the country's energ

9 Coal stocks update suspended for China's six coastal power groups 2020-07-06

Updates on coal stocks and consumption of China's six major coastal power groups are temporarily suspended, after China Huaneng Group, China Huadian Group and China Datang Corporation were said not to

10 Supply woes spur buying interest of thermal coal at N China ports 2020-07-02

Buying appetite of spot thermal coal was seen notably higher at northern China ports, spurred mainly by supply shortage at main production provinces and CHN Energy's upward July term contract prices.

Scan to download sxcoal.com mobile APP

X