China's manufacturers still hurting

@CNNMoney May 24, 2012: 6:53 AM ET
China's manufacturing sector continued to contract in May, according to HSBC's Flash Purchasing Managers' Index.

China's manufacturing sector continued to contract in May, according to HSBC's Flash Purchasing Managers' Index.

NEW YORK (CNNMoney) -- China's manufacturing sector continued to shrink in May, according to preliminary data released Thursday.

HSBC's Flash Purchasing Managers' Index fell to 48.7 in May from 49.3 the previous month. Any reading below 50 indicates the manufacturing sector has been shrinking.

While the news comes as yet another sign of weakness for China, the outlook for the world's second largest economy is still far from clear.

Mark Williams, chief Asia economist for Capital Economics, said the latest PMI report seems to indicate a slowdown in China's gross domestic product, the broadest measure of the economy. He said it also runs counter to other reports showing that income is growing for urban households and migrant workers.

"This weak PMI reading, and the general climate of economic uncertainty, suggests that a pickup in consumer spending growth is unlikely to lift the economy out of its current malaise," said Williams, in a research note.

But he believes the economy could gain steam going forward, with a boost from the government.

"We are however optimistic that recent policy moves, from monetary easing to the speeding up of approvals for infrastructure projects, will start to revive the economy in the next few months," he said.

Manufacturing accounts for more than a third of the Chinese economy, so the PMI is one of the country's most closely watched indicators. That said, the data vary greatly depending on the source.

According to HSBC for example, China's manufacturers have been weakening for 11 months straight. That stands in stark contrast to the Chinese' government's official survey, which includes large state-owned factories and shows the sector has been expanding for at least five months in a row.

China is in the midst of a transition phase, with the government trying to promote more domestic consumption. Meanwhile, exports to Europe -- China's largest foreign market -- have been hurting as the region has teetered on the brink of recession.

-- CNNMoney staff writer Aaron Smith contributed to this story. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.