China’s Private Sector Growth Moderates In May

China’s private sector activity growth moderated to a three-month low in May partly driven by softer rise in services activity, survey results published by IHS Markit revealed Wednesday.

The Caixin composite output index fell to 51.5 in May from 52.7 in April. Nonetheless, the score remained above 50.0 for the thirty-ninth consecutive month, suggesting continuing expansion in the sector.

The services Purchasing Managers’ Index dropped to a 3-month low of 52.7 in May from 54.5 in April. However, the score was consistent with a robust rise in output amid firm client demand.

At the composite level, new orders expanded at a moderate rate that was the least marked for three months. New orders received from abroad rose marginally across both the manufacturing and service sectors in China.

Further, the survey showed that composite employment fell for the first time in three months, albeit at a fractional rate. At the same time, the level of work-in-hand at the composite level remained broadly unchanged.

Measured across both manufacturing and service sectors, average input prices grew at a moderate pace that remained weaker than the historical average. Pricing power of companies was limited by stiff competition.

Finally, overall confidence towards the year ahead weakened to the lowest on record, which was primarily driven by weaker sentiment at manufacturers. Subdued expectations were often linked to the ongoing China-US trade dispute and relatively subdued global demand conditions.

“Overall, China’s economic growth showed some signs of slowing in May. Employment and business confidence in particular merit policymakers’ attention,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM group said.

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