Shanghai reopening will aid China’s economy, but coronavirus still hanging over services, manufacturing
- The official manufacturing purchasing managers’ index (PMI) rose to 49.6 in May, up from 47.4 in April
- Official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, rose to 47.8 from 41.9 in April
China’s economy showed an initial improvement in May as coronavirus cases dropped and restrictions eased, but manufacturing and services activity remained in contraction, with future recovery still vulnerable, analysts said.
Activity in both sectors increased in May, according to the purchasing managers’ indices (PMI) released on Tuesday, but both readings remained below the 50 mark that separates expansion from contraction.
Within the official non-manufacturing PMI, the construction subindex fell to 52.2 in May from 52.7 in April, while the service subindex rose to 47.1 from 40.
The major uncertainty remains whether the Omicron variant will repeat and how the government will respond, that’s the key concern of the market
“The PMIs below 50 indicate that the economy is still slowing, despite an improved slowing rate,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
“Some local governments are gradually improving the efficiency of the logistics system, and this could help the economy take a favourable turn by a small margin.
“In the coming months, the economy is likely to improve, thanks to factors including the reopening of Shanghai, and the PMI will likely rise above 50. But the major uncertainty remains whether the Omicron variant will repeat and how the government will respond, that’s the key concern of the market.”