China: Manufacturing and non-manufacturing PMIs deteriorate in May
The National Bureau of Statistics’ Manufacturing Purchasing Managers’ Index (PMI) fell to 48.8 in May from April’s 49.2. May’s result marked the worst reading since December 2022, and undershot market expectations. As such, the index fell further below the 50.0 no-change threshold, signaling a sharper deterioration in manufacturing sector operating conditions compared to the previous month.
The headline print reflected faster falls in new orders and employment, and worsening output. Meanwhile, the National Bureau of Statistics’ non-Manufacturing PMI came in at 54.5 in May, down from April’s 56.4 and also undershooting market expectations. Within non-manufacturing activity, the services sector held up well as travel spending rebounded during the Golden Week holiday. In contrast, the construction sector lost notable steam. Taken together, the PMI readings provide further evidence that the post-pandemic recovery is petering out, following disappointing data releases for April.
On the near-term outlook, Nomura analysts said:
“We expect the manufacturing PMI to remain in the contraction zone in June, mainly weighed on by strong headwinds from a structural property slump, a deepening global manufacturing downturn and worsening geopolitical tensions. Amid slowing income growth, mounting unemployment pressures, widespread wage cuts and weaker expectations of future income and wealth, pent-up demand for in-person services is also likely to fade in coming months.”