Chinese Manufacturing Slows

Manufacturing output in China may be slowing as companies scale back production and hiring in the face of tighter bank lending. China's purchasing manager's index (PMI) compiled by the China Federation of Logistics and Purchasing (CFLP) fell to 53.9 in May from 55.7 in April. The forecast called for a reading of 54.0. China's PMI has been over 50, the line that demarcates expansion from contraction, for 15 straight months. The Chinese central bank has scaled back credit growth to deter speculative real estate investing and the federal government has also been slowly withdrawing fiscal stimulus to prevent the economy from overheating. Some economists were quick to point out that the PMI has consistently fallen in May due to season factors. They also added that slower growth should be seen as a positive because it implies policy tightening is starting to take effect.