(Yicai Global) June 1 -- Activity in China's manufacturing sector jumped last month for the first time since February, according to the findings of a widely watched private survey.

The Caixin manufacturing purchasing managers' index came in at 50.9 for May, up from 49.5 in April, data released by financial media group Caixin showed today. A reading above 50 indicates expansion. The figure was 50 in March, 51.6 in February, and 49.2 in January.

The official manufacturing PMI, published by the National Bureau of Statistics yesterday, remained in contraction territory for a second straight month in May, dropping to a five-month low of 48.8, down from 49.2 in April and 51.9 in March.

The official gauge is compiled by the government and comprises 3,000 firms, most state owned, whereas the Caixin PMI tracks 500 businesses that are generally smaller and privately owned.

The Caixin manufacturing PMI was uneven last month, said Wang Zhe, senior economist at Caixin Insight Group, with supply and demand much improved, but a worse employment situation, falling price levels, and waning optimism.

The divergence reflected the fact that economic growth is insufficient and confidence among market players is not strong, he said, adding that amid the dire jobs market and growing deflationary pressures, an active fiscal policy to steady employment, boost incomes, and buoy expectations should be the policy priority.

The manufacturing jobs situation continued to deteriorate with a notable decline in confidence among respondents to Caixin’s survey. The employment sub-index fell to the lowest since March 2020. According to manufacturers whose headcounts fell last month, filling vacancies left by staff who voluntarily quit was less important than controlling costs. 

The manufacturing supply and demand sub-indexes had a modest expansion last month. Potential demand improved, and new clients increased, according to the polled companies, adding that this drove sales growth with a corresponding gain in capacities.

The new export order sub-index recovered somewhat, indicating a limited pickup in overseas demand. The production sub-index rose to the highest since last July, while the new order sub-index returned above 50 for the second time in the last two years and the first since February.

But the outlook for the next 12 months among manufacturers deteriorated despite a better overall situation. The manufacturing industry confidence sub-index fell to the lowest since last December and was below a long-term average, as many businesses were worried that economic instability will continue, especially in overseas markets, which is bad for production and operations.

Editor: Martin Kadiev