China factory activity nudges down on slower demand, services strong

Factory activity in China nudged down slightly in May on slower demand and higher raw material prices, while the services industry boomed over the Labour Day break, official data showed Monday.

The Purchasing Managers' Index (PMI), a key gauge of China's manufacturing activity, was 51.0 -- slightly down from 51.1 in April but above the mark separating growth from contraction, said the National Bureau of Statistics.

Although factory production has been "rising steadily", with overall activity exceeding the same periods in the past two years, demand growth has slowed, said NBS senior statistician Zhao Qinghe.

The new export order index fell, he said, "reflecting the decrease in foreign orders".

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Some analysts have pointed to recent supply constraints as a factor behind slower output growth, with Capital Economics saying in a recent note that there are "few signs" of easing, with freight rates still going up.

Meanwhile, the purchasing prices of major raw materials remains high, said the NBS.

But China's non-manufacturing PMI rose to 55.2 in May, with a Labour Day holiday consumer boom supported by long-distance domestic travel and accommodation.

"The consumer market is showing a positive recovery momentum," said Zhao, adding that construction activity also went up.

China's economy has largely rebounded from the coronavirus lockdowns last year, although the consumer recovery has been lagging behind that of industrial activity.