(Yicai Global) May 31 -- The purchasing managers’ index for China’s manufacturing sector, which is a gauge of factory activity, reversed its recent downward trend amid a resurgence of Covid-19 in the country and advanced this month. It could cross back above the benchmark of 50, indicating expansion, in June, analysts said.

The PMI for manufacturing gained 2.2 percentage points in May from the month before to 49.6, according to the latest data released by the National Bureau of Statistics today. A reading above 50 reflects growth, while one below 50 denotes contraction.

The manufacturing PMI will probably return to above the threshold in June as the Covid-19 outbreaks are under control and Shanghai will return to normal business and life after two months of lockdown tomorrow, said Zheng Houcheng, head of a research institute under Yingda Securities.

Market demand has started to pick up as the flare-ups come under control and as government policies to stabilize economic growth take effect, said Zhao Qinghe, senior statistician at the NBS’ Department of Service Statistics.

The PMI jumped this month partly due to last month’s low base number but mainly because manufacturing activities are recovering rapidly, said Wen Tao, an analyst at the China Logistics Information Center.

The sub-index for production climbed, indicating that efforts to get businesses reopened are paying off, said Zhang Liqun, a special analyst at the China Federation of Logistics and Purchasing. The sub-indexes for new orders and new exports have also picked up, demonstrating that the impact of the novel coronavirus on short-term demand has weakened significantly.

But demand remains lackluster, there is still great pressure on the supply side and the pandemic’s impact on economic growth must not be underestimated, Zhang said. The purchasing price sub-index is still high, and more than half of all surveyed firms said they face higher raw materials and logistics costs. The sub-indexes for orders were all below 50, and more than 40 percent of polled companies said there was insufficient demand for their products, he added.

The new export orders sub-index gained 4.6 percentage points month-on-month, showing that China’s policies to stabilize foreign investment and international trade are working, Zheng said. Exports are likely to grow more this month than they did last month.

Logistics have improved and the percentage of firms complaining of a problem with deliveries dropped 8 percentage points from the month before, Zhao said. This has eased the shortage of raw materials to a certain degree, he added.

More measures are needed to further stabilize the economy, such as ensuring logistics run smoothly, helping factories get back to work, boosting domestic demand, securing employment and assisting smaller market players, Wen said.

Editor: Kim Taylor