China factory activity held steady in May, index shows

GLOBAL MARKETS-Asia stocks tread water as China PMI in focus; sterling falters

GLOBAL MARKETS-Asia stocks tread water as China PMI in focus; sterling falters

Investors closely watch the private Caixin Purchasing Manager's Index (PMI) - an indicator of conditions at small manufacturers - as a sign of the country's economic health each month.

"The strong PMI numbers suggest the manufacturing sector has gained growth momentum in the second quarter after the sluggish start of the year", Rob Dobson, senior economist at survey compiler Markit, said.

China's manufacturing and services sectors expanded at a solid pace in May thanks to robust construction and infrastructure investment. Aw said this indicates that the domestic market continued to be the main engine of manufacturing growth.

The index fell to 49.6, weaker than expected and below the 50-point mark which demarcates growth and contraction.

Chen Zhongtao, an analyst at the China Logistics Information Center, said positive factors had grown for the Chinese economy, including balanced supply and demand, better performance of companies and a good job market.

May has highlighted the record number of people in work in her campaign, and Thursday's figures showed that manufacturers planned to hire staff at the fastest pace in almost three years. The rate of expansion was the highest in 16 months which has prompted many companies to prepare for higher orders in the coming months.

The contraction was only slight, but ended a three-month sequence of growth.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said the result suggested the Brexit vote's "dampening influence on construction activity is fading". Any figure above 50 represents expansion. According to Reuters, HI Investment & Securities chief economist Park Sang-hyun stated that "It will be hard for exports to maintain growth in the 20-percent range, we'll likely see growth slow a bit in the second half of the year as the base effects subside from crude oil products which drove export growth in the first quarter".

The pace at which employment rose was also the fastest in two years.

It said slower growth in new work had weighed on production activity.

However, consumer prices rose just 1.4 percent from a year ago in May, compared with 1.9 percent in April.

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