China’s factory activities returned to expansion in May, production, demand improved, employment weakened – private survey
DATA MACRO
China’s factory activities returned to expansion in May, production, demand improved, employment weakened – private survey
DATA MACRO

China’s factory activities returned to expansion in May, production, demand improved, employment weakened – private survey

 

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China’s Caixin Manufacturing PMI for May comes in at 50.9, compared to expected 49.5 and a reading of 49.5 in April, as demand and supply expanded slightly.

The sub-index for production hit the highest level since July 2022, while the sub-index for new orders jumped back above 50 mark, returning to expansion, and hitting the second highest in the past two years, only lower than February this year, according to the survey.

Potential demand improved and new customers increased, which boosted sales and production, according to surveyed companies.

The sub-index for new export orders rose further in May after returning to expansion in April, indicating improving overseas demand, though the rise was limit, showed the survey. 

Despite the improvement in production and sales, the employment sub-index weakened further in May and hit the lowest level since March 2020.

China’s manufacturing PMI data in May showed divergence, with market supply and demand improving sharply, companies more active in purchasing and replenishing inventories, but employment worsening, price levels declining, and optimism fading, said Wang Zhe, senior economist at Caixin Intelligence.

The divergence reflects the fact that the endogenous driving force for the economic growth is insufficient and market entities’ confidence is not strong, highlighting the importance of expanding and restoring demand, he said.

Currently, the employment situation is severe and deflationary pressure is accumulating, and stabilizing employment, increasing income and improving expectations through proactive fiscal policy should be the policy priority, he added.