(Yicai Global) June 1 -- China’s manufacturing activity increased slightly in May from the month before as production and demand start to recover from a resurgence of Covid-19 in the country, according to a widely watched private survey.

The Caixin purchasing managers’ index for manufacturing was 48.1 in May, a gain of 2.1 percentage points from April when it plunged to a 26-month low, and the third straight month that it has stayed below the benchmark of 50, according to data released by financial media group Caixin today. A reading above 50 indicates expansion and one below reflects contraction.

The data is in line with the official manufacturing PMI published by the National Bureau of Statistics yesterday. That figure came in at 49.6 for last month, a gain of 2.2 percentage points from April, and also in negative territory.

Companies polled generally said that the Covid-19 flare-ups affected production, operations and logistics. Although demand picked up from April, export orders have fallen significantly mainly due to delivery difficulties, the report said.

The employment index in May sank further. The index has been in contraction territory for nine out of the past ten months, with the most noticeable drop being in the investment products sector. Some of the companies polled said they had reduced their headcount as the outbreaks affected their business. Others said staff voluntarily left their jobs and they did not seek replacements.

The business confidence index for May was still above 50, but is at the lowest level it has been in the past five months, showing that entrepreneurs still have concerns about the economy although they are generally confident that the outbreaks can be controlled. They are also skeptical about the fallout from the ongoing Russia-Ukraine conflict, Caixin said.

Policymakers need to focus on employment and logistics, but the support should not only serve the supply side, said Wang Zhe, senior economist at Caixin Insight Group. Subsidies for those whose income has been affected by the new waves should also be put on the agenda as soon as possible.

China’s official PMI surveys 3,000 medium- and large-sized companies, while the Caixin PMI polls about 500 small and mid-sized firms.

Editor: Kim Taylor