PMI flat at 50.1; analysts say upturn may not last
The Purchasing Managers' Index (PMI) for May was 50.1, unchanged from April, the National Bureau of Statistics (NBS) and China Federation of Logistics and Purchasing announced on Wednesday.
A reading above 50 indicates expansion, while a reading below 50 reflects contraction.
NBS statistician Zhao Qinghe said China's manufacturing activity maintained steady growth last month, partly due to the expansion of high-technology manufacturing and consumer goods manufacturing.
The high-technology manufacturing PMI was 50.8 and the consumer goods manufacturing PMI stood at 51.5.
The sub-index measuring production stood at 52.3, slightly up from 52.2 a month earlier, and higher than the first quarter's average of 51.3.
"The question was whether the March rebound was a 1-month story or whether weakening in April was the outlier. Our expectation is May and June will fall somewhere in between." said Zhu Haibin, chief China economist at JPMorgan.
"The real estate market recovery has maintained momentum, the number of new investment projects is strong and corporate earnings have improved. The modest recovery will continue," said Zhu.
Higher commodity prices, a better housing market and government spending have helped China's industrial sector, but analysts question whether the upturn will last.
Chinese steel prices posted their sharpest monthly drop ever in May, while more cities are tightening mortgage requirements to restrain prices.
"Prices are recovering and inventories are falling. The economy is improving, but we aren't sure it is sustainable. We think the data may decline again starting in July or August," said economist Wang Jianhui at Capital Securities in Beijing.
A private factory survey painted a darker picture. Smaller manufacturers continued to cut payrolls at a rate similar to February's multi-year record.
The private Caixin/Markit Manufacturing PMI fell to 49.2 last month, below market expectations of 49.3 and April's reading of 49.4.
Economists expect China to maintain infrastructure building, but they are reducing expectations for further broad policy easing by the central bank.
