Factory activity slide eases in May

Marco Green
June 3, 2020

The AIB Manufacturing Purchasing Managers' Index (PMI) for May shows that although many indicators recovered some of the ground lost in April's collapse, they still signalled rapid falls.

It was the second-lowest recorded since the series begin in July 2012, said IHS Markit. Employment in the Arab world's most populous nation has now fallen in each of the last seven months.

But Covid-19 market disruption remains sufficiently strong for 31pc to see their productivity still falling a year from now, maintaining what the survey called "a record degree of pessimism in April". "Employment continued to drop amid excess capacity, further hampering demand conditions", he added.

"Some firms noted that an easing of lockdown measures had helped mitigate the downturn in May, alongside efforts to boost online business operations", he said. However, businesses continued to report an impact on customer demand from the Covid-19 pandemic, according to the survey.

Lockdown measures worldwide have notably reduced exports, and limited input supply.

But with many of China's trading partners still restricted, its new export orders remained in contraction, the private business survey showed on Monday. "Until we see a sustained improvement in demand, manufacturing conditions are likely to remain fragile".

This bounce was expected as lockdown restrictions were eased during the second and third phase.

Taiwan's manufacturing activity also fell in May.

Last month, official Chinese data suggested industrial activity bounced back in a "V-shaped" recovery as production rose 3.9% year-on-year in April after a sharp drop in the first three months of 2020. "And things are likely to continue improving very gradually over the coming months as external demand recovers", analysts at the consultancy wrote.

The market-research firm's Caixin China General Manufacturing Purchasing Managers Index (PMI) posted an overall reading of 50.7, up from 49.4 in April, returning to expansion territory.

Also, there are some sombre signs in the services PMI reading.

"With some parts of the country allowed to restart limited manufacturing in mid-May, output improved from April's lows where nearly 70% of the economy was shuttered as we sheltered in place".

The latest data collected in Saudi Arabia between 12-21 May also shows a decline in new order volumes across the private sector economy due to worsening global economic conditions and spending cutbacks.

"Mr Hayes further noted that "demand for services, both domestically and overseas, continued to plummet in May as clients" businesses remained closed and footfall was drastically below normal levels".

Other reports by Click Lancashire

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