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Improvement in China factory results

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The Australian dollar crept up after stronger than expected Chinese manufacturing figures.

The HSBC flash PMI survey, which favours smaller, privately-owned firms, recorded an overall result of 49.7 for May. This was an improvement on April’s 48.1.

The results were still indicative of a contracting sector. Any result above 50 indicates growth, and below it decline.

AAP notes that the results were “stronger than expected” by economists.

HSBC’s chief China economist Hongbin Qu said the recovery was broad-based, and noted that in the report that, “Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs.

"But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months."

The Australian dollar strengthened to $US0.926 from $US0.9225 shortly after the news.

FXCM analyst David de Ferranti pointed out that China’s factories were in contraction.

“On balance Chinese data remains relatively soft, and a deterioration would bode ill for its major trading partners including Australia, which in turn may weigh on the Aussie,”he said.

Image: Reuters

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