China: Manufacturing PMI back into contraction territory - TDS

Analysts at TD Securities note that China’s May manufacturing PMI fell back into contraction territory, falling to a lower than consensus 49.4 (market 49.9, TD 49.8).

Key Quotes

“Worsening in trade tensions with the US likely weighed further on manufacturing confidence and it appears that the bounce in activity in March is fading. The components gave an even more negative picture than the headline. New orders dropped to 49.8, the first below 50 reading following three months of expansion.”

“Worryingly for officials, the employment component fell to its lowest since February 2009. Output prices dropped to 49.0, pointing to profit pressures, while new export orders dropped further into contraction to 46.5. The data is likely to spur calls for more stimulus from the authorities, who will likely respond with more targeted measures in coming weeks.”