China’s factory activity growth slowed slightly in May as raw materials costs grew at their fastest pace in over a decade, weighing on the output of small and export-oriented firms.
The official manufacturing Purchasing Managers’ Index inched lower to 51.0 in May, against analyst expectations that it would remain unchanged from April at 51.1, data from the National Bureau of Statistics showed yesterday.
The official PMI, which largely focuses on big and state-owned firms, has stood above the 50-point mark that separates growth from contraction for over a year.
In the services sector, activity expanded for the 15th straight month, and at a faster pace, with the non-manufacturing PMI index rising to 55.2 from 54.9 the month before.
While the Chinese economy has largely shaken off the gloom from the Covid-19 pandemic, officials warn the foundations for the recovery are not yet secure amid problems like higher raw material costs and the pandemic situation overseas.
Iris Pang, chief economist for Greater China at ING, said in a note that “external demand will likely remain flat” as economic recoveries in the United States and parts of Europe are likely to be “offset by increasing Covid cases in Asean, which is the biggest trade partner of China.”
Some emerging Covid-19 cases in China’s Guangdong province, where most electronic factories are located, continued semiconductor chip shortages and high commodity prices are also among the challenges facing producers, she added.