China's factory activity unexpectedly dips in May

China's manufacturing activity unexpectedly fell in May. The official manufacturing purchasing managers' index (PMI) dropped to 49.5 in May from 50.4 in April (below the 50-mark separating growth from contraction), the National Bureau of Statistics (NBS) said  .

The disappointing number adds to a series of recent indicators showing the $18.6 trillion economy is struggling to get back on its feet, eroding earlier optimism seen after better-than-expected output and trade data.

The PMI's sub-indices for new orders and new export orders both tipped back into contraction after two months of growth, while employment continued to shrink.
The services sub-index under the NBS non-manufacturing survey improved to 50.5 in May from 50.3 in April. But growth as represented by the broader services index, which also includes construction, slowed in May to 51.1 from 51.2 a month prior.

Problems in the property sector have had a negative impact across broad areas of China's economy and slowed Beijing's efforts to shift its growth model more towards domestic consumption from debt-fuelled investment.

Retail sales last month grew at their slowest since December 2022 while new home prices fell at their fastest rate in nine years, suggesting it is too early to say if the battered economy has finally turned a corner.

The International Monetary Fund on Wednesday revised up its China growth forecast by 0.4 percentage points to 5% for 2024 and 4.5% in 2025, but warned the property sector remained a key growth risk.