The Caixin Manufacturing PMI in China fell to 49.2 in May from 49.4 in the previous month, a reading that was slightly below market consensus. It was the weakest reading since February this year as output fell fractionally while new orders shrank for the first time since February.
Experts said that China is unable to sustain the momentum of the first quarter and is still in the process of bottoming out.
“Overall, China’s economy has not been able to sustain the recovery it had in the first quarter and is in the process of bottoming out. The government still needs to make full use of proactive fiscal policy measures accompanied by a prudent monetary policy to prevent the economy from slowing further,” said Zhong Zhengsheng, the director of macroeconomic analysis at CEBM Group.
On a similar vein, Malaysia’s headline PMI posted 47.2 in May, where little has changed since April’s five-month low. The reading indicates a solid deterioration in operating conditions at Malaysian manufacturers.
The latest figure was below the average over the current 14-month sequence of contraction according to Markit. The May reading reflected contractions in output, new orders and stocks of purchases.
Experts at Markit said the impact of the recent weakness in the Malaysian currency was mixed as far as manufacturing conditions are concerned.
“New exports orders benefitted from the weak ringgit which improved firms’ global competitiveness. However, the weak ringgit meant that imported raw material costs increased, leading to a rise in input prices. In fact, purchasing prices rose at the sharpest rate since February,” said Amy Brownbill, an economist at Markit.
In Indonesia, the Nikkei Manufacturing dropped to 50.6 in May from 50.9 in April. While output stagnated following two consecutive months of growth, new orders rose at a slower pace, details from the data showed.
In Indonesia, both employment and buying activity were up and stocks were accumulated. Growth of preproduction inventories was only slight, while an increase in holdings of finished goods was sharp and the quickest since April 2011.
On the price front, input costs increased at the strongest rate in 2016 so far, while charge inflation was at a three-month high, Markit said, adding that the outlook is encouraging. “The outlook, however, appears encouraging as businesses continued to take on additional workers and scaled up their buying activity to the greatest extent since July 2014, suggesting that a pick-up in demand is expected,” said Pollyanna De Lima, an economist at Markit.
Elsewhere in Asia, South Korea’s manufacturing PMI rose slightly to 50.1 in May from 50.0 in April. Japan and Taiwan’s manufacturing PMI both registered a dip. The former dropped to 47.7 in May from 48.2 in April, while the latter fell to 48.5 in May from 49.7 in April.
