Manufacturing activity slows throughout May

Manufacturing conditions deteriorated in May.

The stats bureau (NBS) and Caixin released May PMI data on Saturday and Tuesday, respectively.

• The Caixin PMI dropped to 48.3 – the lowest reading since September 2022 – down from 50.1 in April.
• The NBS PMI rose to 49.5, up from 49.0 the previous month.

ICYDK: Headline PMI figures reflect month-on-month changes in overall manufacturing conditions, where readings above 50 signal improvement and below 50 indicate deterioration.

Falling demand for manufactured products drove May’s poor PMI readings.

• The domestic and foreign orders sub-indexes were in contractionary territory across the NBS and Caixin PMIs.

The economic pain wasn’t evenly spread:

• In the NBS print, large manufacturers scored an average PMI of 51.5, while medium and small manufacturers scored 47.5 and 49.3, respectively.

But factory prices declined across the board.

• The purchasing price sub-indexes for both the NBS and Caixin surveys indicated deterioration.

Our take: Don’t panic. May’s disappointing PMI readings follow a solid run of stronger-than-expected manufacturing activity, and one weak print doesn’t signal a trend reversal.

• The divergence in PMI readings between large and small firms suggests that May’s manufacturing weakness isn’t systemic.
• Plus, given the recent reprieve in US tariffs, China’s exports to the US are likely to rebound this month – benefiting small and medium-sized manufacturers in particular.