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June 4, 2019

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Manufacturing stable, with orders higher

CHINESE manufacturing activity remained stable in May with the purchasing managers’ index in positive territory for the third consecutive month, according to Caixin’s latest report released yesterday.

The Caixin China General Manufacturing Purchasing Managers’ Index, which measures the manufacturing sector and is weighted toward private companies, was 50.2 in May, flat from the previous month, Caixin magazine and research firm Markit said. A reading above 50 signals growth.

The Caixin PMI is a private survey focusing on smaller businesses and is closely watched as an alternative to the PMI.

The official manufacturing PMI for May released last Friday was 49.4, indicating contraction, retreating 0.7 points from April.

Chinese manufacturers signaled a further slight improvement in overall operating conditions during May, indicating a mild expansion in the manufacturing sector.

Underpinning the positive PMI figure was a further increase in new orders placed with Chinese goods producers.

The sub-index for new orders edged higher, and the gauge for new export orders moved back above 50 to the same level as in January, which was the best reading since March 2018.

“The improvements in both indexes signal stable domestic and overseas demand,” according to Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

According to survey respondents, new product releases and firmer foreign demand supported the expansion.

In the meantime, production at Chinese manufacturers was stable in May, following a slight increase in the previous month.

The stronger rise in overall new business supported a renewed expansion in buying activity among Chinese manufacturing firms. Though only slightly, it was the first time purchasing activity had increased for five months, the report noted.

Inventories of inputs were broadly stable for the second month in a row.

Meanwhile, greater use of current stocks to fulfill new business reportedly underpinned a further decline in inventories of finished goods.

The gauge of input prices showed a marginal increase, while that of output prices edged down to the lowest reading in four months, suggesting that while prices of manufactured goods remained relatively stable, enterprises are facing pressure from rising raw material prices, Zhong said.

Business confidence in May slipped to the lowest level since the series began in April 2012 amid concerns of an escalating China-US trade war and forecasts of relatively subdued global demand.

“The best way to respond to this is to boost the confidence of enterprises, residents and capital markets by carrying out favorable reforms and to undertake timely adjustments to regulations and controls,” Zhong said.


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