The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) dipped to 48.3 in May from 50.4 in April, below the 50-point mark that separates expansion from contraction. The figure hit its lowest level since September 2022. Compared to the official PM, the Caixin manufacturing PMI tracks small, export-oriented companies more closely. Wang Zhe, Senior Economist at Caixin Insight Group, linked the contraction in the manufacturing sector to the decline in both supply and demand, saying unfavorable factors affecting China’s economic development remain relatively prevalent. “Uncertainty in the external trade environment has increased, adding to domestic economic headwinds,” he said.
China’s May exports were up by 4.8% year-on-year to USD316.1 billion, following April’s 8.1% growth and fell short of the estimate of a 6.28% increase in a market survey by Chinese financial data provider Wind. Exports to the United States plunged by 34.52%, sharper than the 21% drop seen in April, owing to the trade war between the two countries. Shipments to members of the Association of Southeast Asian Nations (ASEAN) rose by 14.84% in May. Imports, meanwhile, fell by 3.4% year-on-year, compared with a 0.2% downtick in April. Wind predicted a 0.7 per cent increase. China’s trade surplus stood at USD103.2 billion in May, up from USD96.18 billion in April.
The Caixin report showed that the gauge for new orders hit contraction for the first time in eight months, recording the lowest level since September 2022. However, business optimism improved from April’s low, as surveyed manufacturers generally believed that the China-U.S. trade conflict would abate in the near term, expecting to see improvements in the external market. The indicator for future output expectations remained in expansionary territory in May, with the reading rebounding by nearly 3 percentage points, up from the third-lowest level on record seen in April. “Major macro-economic indicators showed a marked weakening at the start of the second quarter,” Wang said. “The downward pressure on the economy has significantly intensified compared to preceding periods.” He noted that the lasting impact of earlier measures aimed at stimulating consumption needs further evaluation, saying follow-up actions should be introduced based on actual conditions. “More importantly, boosting domestic demand should be grounded in improving household incomes,” he added.
The National Bureau of Statistics (NBS) reported that the official PMI for China’s manufacturing sector came in at 49.5 in May, up from 49 in April, but remained in the contraction zone for a second consecutive month. Lu Ting, Chief China Economist at Nomura, said the improvement in the official manufacturing PMI was led by the increase in new export orders, thanks to the U.S.-China tariff de-escalation. However, he noted that the fact that the manufacturing PMI failed to rise into expansionary territory shows that the impact from the tariff truce should not be overstated, the China Daily reports.
