China's factory activity was likely to contract at a slower pace in May, as some virus curbs were lifted in key manufacturing hubs, according to a poll by Reuters.
The official manufacturing Purchasing Manager's Index PMI is expected to rise to 48.6 in May from 47.4 in April, the third straight month of contraction, according to the median forecast of 30 economists polled by Reuters on Monday. A reading below 50 indicates a contraction from the previous month and above 50 indicates an expansion.
Early signs suggest that conditions may improve a bit in May, after the manufacturing PMI fell to the second-weakest on record in April, Julian Evans-Pritchard, an economist at Capital Economics, said in a note.
Some of the manufacturers in Shanghai that had to halt operations in April were allowed to resume production this month. The measures implemented in the major manufacturing hubs of Changchun and Shenyang were rolled back. He said that the lifting of intercity restrictions eased supply chain disruptions.
The commercial hub of Shanghai, located at the heart of the Yangtze River Delta, is taking gradual steps toward ending a prolonged city-wide lockdown on Jun 1. On Thursday, Tesla added a second shift at its Shanghai plant, aiming to make 2,600 cars daily.
The weak growth in steel production and the depressed power generation are some factors behind the rapid ramping up of production levels, according to analysts.
The reading reflects the slow recovery in the Yangtze River Delta supply chain dislocations post-Shanghai lockdown, as well as subdued new orders given still-weak domestic consumption and softening global demand, Morgan Stanley analysts said in a note.
China's economy is still under downward pressure in the second quarter, with problems in the property sector and some places still stuck in lockdown.
In the first quarter, many private sector economists think that the economy will shrink this quarter from a year ago, given the government has shown no signs of relaxing its zero-COVID policy.
On Wednesday, Premier Li Keqiang said that China will try to achieve reasonable economic growth in the second quarter and lower the unemployment rate as soon as possible.
The PMI, which focuses mostly on big and state-owned firms, and its sister survey for the services sector, will be released on Tuesday.
The PMI, focusing more on small firms and coastal regions, will be published on Wednesday. Analysts expect a headline reading of 48.0, up from 46.0 for the previous month.