By Gina Lee

Investing.com –

China’s factory activity shrank in May, but the pace is slower as COVID-19 curbs eased, improving from a 26-month low in April.

It was 48.1 in May. This is higher than the 48 forecasts prepared by Investing.com. 46 were recorded in April 2022. However, the data remains below 50 points which is what separates growth and contraction.

This data matches the PMI for manufacturing released Tuesday, which rose from 47.4 to 49.6. The second-sharpest slump in May since February was contraction, which indicates a fragile recovery.

Companies suffered from economic loss due to restrictions imposed by COVID-19, including lockdowns in China and mass tests in China. Although the sub-index of new orders declined for the third month consecutively in May, the pace was slower.

The Caixin PMI saw most of its sub-indices fall less after the lockdown was eased and phased.

However, “unlike most other gauges, the employment measure fell further into negative territory in May,” Caixin Insight Group senior economist Wang Zhe said in a statement accompanying the data release as employers were reluctant to hire more staff.

“The negative effects from the latest wave of domestic outbreaks may surpass those of 2020. It’s necessary for policymakers to pay attention to employment and logistics,” Wang added.

Even if Beijing striving to support the economy, analysts say the COVID-19 control measures threaten China’s growth target of “around 5.5%” for the year.

“While its recovery from the first wave of COVID in early 2020 was aided by a surge in construction activity, property developers are now struggling to finance existing projects. They won’t launch new ones until there has been a marked pick-up in sales,” Capital Economics group chief economist Neil Shearing said in a note.