China’s May Factory Activity Drops Faster than Expected on Weak Demand

China’s factory activity contracted quicker than anticipated in May, registering at 48.8, below the 50-point threshold that separates growth from contraction, official data showed on Wednesday.

In April, the official manufacturing purchasing managers’ index (PMI) reported by the National Bureau of Statistics (NBS) dropped to 48.8 from 49.2 in April, marking its lowest reading in five months. The PMI also failed to meet expectations of rising to 49.

The official services PMI dropped to 54.5 in May from 56.4 in April, showing that non-manufacturing activity expanded at its slowest pace in four months.

Early Wednesday trade in Asia was negative as a result of the data, with Hong Kong equities plunging dramatically.

Three years of pandemic lockdowns have ended in China, but the country’s economic recovery has been sluggish overall, with spending on services outpacing that on manufacturing, real estate, and exports.

Economic indicators such as PMIs and sales figures for April show that the rebound is losing speed.

More targeted measures are needed to promote demand, Premier Li Qiang said this month, and on May 15 the People’s Bank of China pledged “strong and stable” assistance for the real economy.