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A closely watched private sector gauge of Chinese manufacturing showed that the sector experienced a third consecutive monthly decline in May, but the rate of contraction slowed from the month before.

The Caixin China General Manufacturing purchasing managers’ index rose to 48.1 in May, up from 46 in April but still below the 50-point threshold that separates contraction from expansion. The reading was broadly in line with economists’ expectations.

The slowing rate of contraction was helped by a smaller reduction in manufacturing production and new orders compared with April, suggesting that pressure on supply and demand was weakening.

China’s economy was hammered in May by strict lockdowns to combat Covid-19, including in Beijing and Shanghai, leading Premier Li Keqiang to issue a stark warning that the country might struggle post positive economic growth this quarter.

The Caixin PMI found that the time for goods to reach manufacturers had continued to lengthen “markedly” as Covid restrictions on travel weighed on the country’s logistics network. Business confidence about the next year slipped to a five-month low as concerns over the virus and the war in Ukraine weighed on sentiment.

On Tuesday, an official gauge of manufacturing activity, which puts a greater focus on larger, state-owned enterprises and tends to strike a more optimistic note, came in at 49.6.

Wang Zhe, senior economist at Caixin Insight Group, said that Covid outbreaks had continued to constrain the economy in May and that the negative impacts of the latest waves could outweigh those of 2020, when the pandemic began.

“It’s necessary for policymakers to pay attention to employment and logistics. Removing obstacles in supply and industrial chains and promoting resumption of work and production will help to stabilise market entities and protect the labour market,” Wang said.

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