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China Factory Activity Shows Positive Signs China Factory Activity Shows Positive Signs
(about 9 hours later)
BEIJING — China’s factory sector turned in its best performance in five months in May, a preliminary survey by HSBC showed on Thursday, though overall manufacturing still contracted slightly, in a suggestion that the outlook remains uncertain. BEIJING — This month, China’s factory sector turned in its best performance in five months, a preliminary survey by HSBC showed on Thursday, though overall manufacturing still contracted slightly, in a suggestion that the outlook remains uncertain.
The HSBC Flash China Manufacturing purchasing managers’ index, or P.M.I., recovered to 49.7 in May from April’s final reading of 48.1, beating a Reuters poll forecast of 48.1. The HSBC flash China manufacturing purchasing managers’ index, or P.M.I., recovered to 49.7 in May from April’s final reading of 48.1, beating a Reuters poll forecast of 48.1.
But the data remained just below the 50-point level, which separates a monthly growth in activity from a contraction, indicating that manufacturers actually experienced a slight drop in business.But the data remained just below the 50-point level, which separates a monthly growth in activity from a contraction, indicating that manufacturers actually experienced a slight drop in business.
Still, those hoping for any sign of stabilization in China’s wobbly economy may find some welcome relief in Thursday’s report. Still, those hoping for any sign of stabilization in China’s wobbly economy may find some relief in Thursday’s report.
Asian stocks and emerging Asian currencies extended early gains after the report, while the Australian dollar edged higher.Asian stocks and emerging Asian currencies extended early gains after the report, while the Australian dollar edged higher.
A breakdown of the survey results showed the handful of closely followed indexes that measure output and domestic and foreign demand all improved substantially in May to rise above the 50-point mark, from sub-50 levels in April.A breakdown of the survey results showed the handful of closely followed indexes that measure output and domestic and foreign demand all improved substantially in May to rise above the 50-point mark, from sub-50 levels in April.
New export orders, an indicator of foreign demand, showed the biggest turnaround. The index climbed 3.4 points to 52.7, a level not seen in more than three years. New export orders, an indicator of foreign demand, showed the biggest turnaround. The index climbed 3.4 points to 52.7, a level not reached in more than three years.
“The improvement was broad-based, with both new orders and new export orders back in expansionary territory,” said Qu Hongbin, chief economist for China at HSBC. “Disinflationary pressures also eased over the month, and output prices increased for the first time since November 2013.”“The improvement was broad-based, with both new orders and new export orders back in expansionary territory,” said Qu Hongbin, chief economist for China at HSBC. “Disinflationary pressures also eased over the month, and output prices increased for the first time since November 2013.”
“Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs,” he said. “But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months.”“Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs,” he said. “But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months.”
He also noted the employment index had fallen further to 47.3, which implies that this month’s uptick in sentiment had not yet filtered through to the labor market. Of the 11 subindexes in the survey, all but those for employment and stocks of finished goods rose from April.He also noted the employment index had fallen further to 47.3, which implies that this month’s uptick in sentiment had not yet filtered through to the labor market. Of the 11 subindexes in the survey, all but those for employment and stocks of finished goods rose from April.
In the case of employment, the index fell more than a point to well under 50, the 13th consecutive month that jobs have been lost in the manufacturing sector.In the case of employment, the index fell more than a point to well under 50, the 13th consecutive month that jobs have been lost in the manufacturing sector.
Any marked weakening in the labor market would raise alarm bells for China’s government, which regards healthy employment levels as a top policy priority and an important condition for social stability.Any marked weakening in the labor market would raise alarm bells for China’s government, which regards healthy employment levels as a top policy priority and an important condition for social stability.
Premier Li Keqiang said in March that it is all right if economic growth comes in slightly below the government’s target of 7.5 percent, as long as the job market holds up.Premier Li Keqiang said in March that it is all right if economic growth comes in slightly below the government’s target of 7.5 percent, as long as the job market holds up.
Hit by unsteady global demand, slowing domestic investment growth and a cooling property market, China’s economic growth fell to an 18-month low in the first three months of this year.Hit by unsteady global demand, slowing domestic investment growth and a cooling property market, China’s economic growth fell to an 18-month low in the first three months of this year.
Economists polled by Reuters believe growth in China, the world’s second- largest economy, will dip to a 24-year low of 7.3 percent this year, just ahead of the 7.2 percent expansion that Mr. Li has said is necessary for a robust labor market. Economists polled by Reuters believe growth in China, the world’s second-largest economy, will dip to a 24-year low of 7.3 percent this year, just ahead of the 7.2 percent expansion that Mr. Li has said is necessary for a robust labor market.
Japanese manufacturing activity also contracted in May but at a slower pace than the previous month, a similar preliminary survey showed, in a sign of tentative recovery after a sales tax increase in April led to a slowdown in consumer spending.Japanese manufacturing activity also contracted in May but at a slower pace than the previous month, a similar preliminary survey showed, in a sign of tentative recovery after a sales tax increase in April led to a slowdown in consumer spending.
The Markit/JMMA Flash Japan Manufacturing purchasing managers’ index rose to a seasonally adjusted 49.9 in May from a final reading of 49.4 in April. The Markit/JMMA flash Japan manufacturing purchasing managers’ index rose to a seasonally adjusted 49.9 in May from a final reading of 49.4 in April.
The index for new export orders fell to a preliminary 48.2 from a final reading of 49.1 in April. Exports have been a soft spot for the recovering economy, and policy makers have been counting on a rebound in shipments to offset the expected drop in consumer consumption in the immediate months after the sales tax increase. But there is growing evidence that damage from the tax hike will be limited. A Reuters survey showed companies expect sales to bounce back and are more willing to raise wages.The index for new export orders fell to a preliminary 48.2 from a final reading of 49.1 in April. Exports have been a soft spot for the recovering economy, and policy makers have been counting on a rebound in shipments to offset the expected drop in consumer consumption in the immediate months after the sales tax increase. But there is growing evidence that damage from the tax hike will be limited. A Reuters survey showed companies expect sales to bounce back and are more willing to raise wages.