Beijing: A Reuters poll showed that some virus restrictions were lifted in key manufacturing hubs in May, which may have slowed down the rate of factory activity in China. The official Purchasing Manager’s Index (PMI) for manufacturing is expected to rise to 48.6 in May from 47.4 in April. This would be the third month in a row that manufacturing shrank, according to the median prediction of 30 economists polled by Reuters on Monday. If the number is below 50, it means the economy shrank from the previous month, and if it is above 50, it grew.
An economist at Capital Economics, Julian Evans-Pritchard, said in a note that there are early signs that things got a little better in May after the manufacturing PMI dropped in April to the second-worst level on record.
“Some factories in Shanghai that had to stop making things in April were given permission to start up again this month.” And the steps that had been taken in Changchun and Shenyang, which are two of the most important manufacturing cities, were taken back. The lifting of intercity restrictions also made it easier to get goods from one place to another, “he said.
Shanghai, which is the center of manufacturing in the Yangtze River Delta and a major business center, is taking small steps to end the city-wide lockdown on June 1. At Tesla (NASDAQ: TSLA), a second shift was added to its Shanghai plant on Thursday. This means that the plant will soon be able to make 2,600 cars every day.
Analysts say that factories are only slowly increasing their production levels. This is because steel production is only growing slowly, and the amount of power being made is also down.
Analysts at Morgan Stanley (NYSE:MS) said in a note that the weak reading shows “the slow recovery in Yangtze River Delta supply chain dislocations after the Shanghai lockdown,” as well as “the subdued new orders were given still-weak domestic consumption and softening global demand.”
In the second quarter, China’s economy is still being pulled down by problems in the property market and the fact that some places are still on lockdown.
Many private economists believe it will contract this quarter when compared to the same period last year. This is because the government hasn’t shown any signs of relaxing its “zero-COVID” policy.
Premier Li Keqiang said on Wednesday that China will try to make sure the economy grows at a good rate in the second quarter and that the unemployment rate goes down as soon as possible.
On Tuesday, the official PMI, which mostly looks at big and state-owned companies, and a similar survey for the services sector, will be released.
The Caixin manufacturing PMI for the private sector, which pays more attention to small firms and coastal areas, will be released on Wednesday. Analysts expect the headline number to be 48, up from 46.0 the month before.
