China’s manufacturing activity contracted for the first time in eight months in May as the rise in US trade tariff damped export orders, survey results from S&P Global showed on Tuesday.
The Caixin manufacturing Purchasing Managers’ Index unexpectedly fell to 48.3 in May, down from 50.4 in April. The score was seen at 50.8.
The score fell below the neutral 50.0 mark for the first time in eight months and the reading was the lowest since September 2022.
The official PMI data released over the weekend suggested that the manufacturing activity shrank at a slower pace in May. The factory PMI rose to 49.5 in May from 49.0 in April. Meanwhile, the non-manufacturing PMI dropped marginally to 50.3 from 50.4 in the previous month.
The major cause for the decline was the reduction in new orders, S&P survey showed. Incoming new orders fell at the fastest rate in more than two years. Export orders decreased for the second month in a row and manufacturing output slid for the first time in 19 months.
There was another depletion of backlogged orders in May. Manufacturers scaled back headcounts in May either through redundancies or the non-replacement of job leavers.
The increase in stocks of purchases suggested that there was an adequate level of pre-production inventory holdings. At the same time, stocks of finished goods accumulated for the first time in four months. Meanwhile, supplier lead times lengthened marginally.
Regarding prices, the survey showed that average input costs and output charges continued to fall. Moreover, the rates of reduction accelerated since April.
Finally, sentiment among manufacturers improved in May as firms grew more hopeful that trade conditions can improve and the widening of export markets will help to drive sales in the year ahead.
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