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Chinese Manufacturing PMI Declined in May

The Chinese National Bureau of Statistics just released its May Manufacturing PMI (Purchasing Managers’ Index) numbers. The overall PMI declined to 49.5 percent, a month-over-month drop of 0.9 percentage point. The PMI’s new orders sub-index (49.6 percent) and the new export orders (48.3 percent) sub-index both fell back into contraction territory.

The employment sub-index was at 48.1 percent, indicating that employment in manufacturing companies continues to shrink. The purchase price sub-index for major raw materials climbed to an eight-month high, reflecting rising commodity costs. A fragile recovery persists in manufacturing (with the production sub-index at 50.8 percent), but rising trade protectionism will pose a major headwind in the coming months.

In May, the PMI of large enterprises was 50.7 percent. However, the PMI numbers for small and medium-sized enterprises were 49.4 percent and 46.7 percent respectively, down 1.3 and 3.6 percentage points from the previous month. Medium and small companies hired the majority of the Chinese workforce.

China’s manufacturing sector is under pressure. Beijing is currently facing rising trade tensions with the United States and the European Union — China’s two largest export markets. New trade barriers have been erected that will hinder sales of key products such as electric vehicles and parts.

Source: The Chinese National Bureau of Statistics, May 31, 2024