China Caixin manufacturing PMI was unchanged at 50.2 in May, above expectation of 50.0. Production was broadly stable in May. Total new work and export sales both increase slightly. And, there was renewed rise in purchasing activity.
Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
“The Caixin China General Manufacturing Purchasing Managers’ Index was 50.2 in May, unchanged from the previous month, indicating a mild expansion in the manufacturing sector.
1) The subindex for new orders edged higher, and the gauge for new export orders moved back above 50 to the same level as in January, which was the best reading since March 2018. The improvements in both indices signals stable domestic and overseas demand.
2) The output subindex declined for the second straight month, although it remained marginally in expansionary territory. Employment conditions have broadly stabilized, with the employment subindex showing only a marginal drop in staff numbers.
3) The gauge of stocks of purchased items moved back above the 50 mark that divides expansion from contraction and the measure of stocks of finished goods edged up, albeit remaining in contractionary territory, indicating that while inventories remain low, manufacturers’ willingness to replenish stocks has strengthened. The subindex measuring supplier performance fell further into contractionary territory, to signal that companies are taking longer to ship orders and also a reflection of relatively low inventory levels.
4) The gauge of input prices showed a marginal increase, while that of output prices edged down to the lowest reading in four months, suggesting that while prices of manufactured goods remained relatively stable, enterprises are facing pressure from rising raw material prices.
5) The subindex measuring sentiment towards future output plunged to its lowest reading since the gauge began in April 2012, a reflection of the trade conflict between China and the U.S. and weakened business confidence.
“Overall, China’s economy showed steady growth and resilience in May. The manufacturing sector saw demand rise from both overseas and domestic markets, and prices were stable. However, business confidence weakened, and manufacturers’ inventory levels remained low. The trade tensions between the U.S. and China are having an impact on confidence and the best way to respond to this is to boost the confidence of enterprises, residents and capital markets by carrying out favorable reforms and to undertake timely adjustments to regulations and controls.”
