China's manufacturing activity unexpectedly declined in May, according to an official factory survey released on Friday. This development has renewed calls for additional stimulus as the ongoing property crisis continues to burden businesses, consumers, and investors.
The official Purchasing Managers' Index (PMI) dropped to 49.5 in May from 50.4 in April, falling below the 50-mark that distinguishes growth from contraction and missing the median forecast of 50.4 from a Reuters poll.
Although strong GDP data from the first quarter has lessened some of the urgency for increased stimulus, analysts remain uncertain about the sustainability of recent momentum as authorities strive to stabilize the troubled property sector.
On Wednesday, the International Monetary Fund (IMF) revised its growth forecast for China, raising it by 0.4 percentage points to 5% for 2024 and projecting 4.5% growth in 2025. However, the IMF warned that the property sector remains a significant risk to growth.
The property sector's issues have negatively impacted various areas of China's economy, hindering Beijing's efforts to shift its growth model towards domestic consumption rather than debt-fueled investment.
For example, retail sales in April grew at their slowest pace since December 2022, although data on factory output, trade, and consumer prices suggested the $18.6 trillion economy might be turning a corner.
This month, China introduced "historic" measures to stabilize the property market. However, analysts argue that these measures are insufficient for a sustainable recovery.
The IMF noted there is "scope for a more comprehensive policy package to address property sector issues."
Paraphrasing text from "Reuters" all rights reserved by the original author.
