China Manufacturing PMI Rebounds in May

PMI
China's manufacturing PMI rose 0.5 percentage point to 51.9% in May 2018, and was 0.7 percentage point higher than last May. So far manufacturing PMI has stayed in expansionary territory for 22 consecutive months. Non-manufacturing PMI slightly increased 0.1 percentage point, and composite PMI stood at 54.6%, 0.5 percentage point higher than last month. Overall, major headline PMIs were still above breakeven point (50%), indicating the economy is still resilient.
PMI

By Suyang Zhou - Research Analyst

China's manufacturing PMI rose 0.5 percentage point to 51.9% in May 2018, and was 0.7 percentage point higher than last May. So far manufacturing PMI has stayed in expansionary territory for 22 consecutive months. Non-manufacturing PMI slightly increased 0.1 percentage point, and composite PMI stood at 54.6%, 0.5 percentage point higher than last month. Overall, major headline PMIs were still above breakeven point (50%), indicating the economy is still resilient.

Drilling into the five breakdown items of manufacturing PMI, production (54.1%) and new orders (53.8%) surged, showing that manufacturing production and demand continues to grow. Materials inventory trended up 0.1 percentage point on a monthly basis to 49.6%, indicating manufacturers are continuing to de-stock materials. Employment climbed 0.1 percentage point to 49.1%. Supplier deliveries edged down 0.1 percentage point to 50.1%, indicating slower delivery time of raw materials in the manufacturing industry.  

China PMI

On the other hand, foreign trade indicators recovered significantly in May. New export orders (51.2%) rose 0.5 percentage point on a m-o-m basis, and are also higher than the average levels in 2017 (50.9%) and the first quarter of 2018 (49.9%). At the same time import orders (50.9%) increased 0.7 percentage point in May, and are also higher than the average levels in 2017 (50.8%) and Q1 2018 (50.5%). This data would still see large fluctuations in the near future against the backdrop of trade tensions.

Domestic orders, as measured by the difference between new orders and new export orders, bounced back by 0.4 percentage point. Тhe difference between material and finished goods inventory, the so-called manufacturers' willingness of re-stocking, rose significantly by 1.2 percentage point in May.  

Looking into manufacturing PMI by enterprise category, PMI in large (53.1%) and medium enterprises (51.0%) rose 1.1 percentage point and 0.3 percentage point, respectively. The PMI in small enterprises, however, declined 0.7 percentage point to 49.6%.

According to the National Bureau of Statistics survey, 40.1% of enterprises complained about tightened funding issues. This percentage has been rising for three months in a row now. The tightened financing conditions come as a result of lower levels of liquidity in the market. Thus, further adjustments in monetary policy, such as reserve requirement ratio cut, are still expected.

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