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China's May manufacturing biz situation better for 1st time in 90 days

02 Jun '23
2 min read
Pic: Adobe Stock
Pic: Adobe Stock

Insights

  • China's manufacturing business conditions improved for the first time in three months during May, PMI data show.
  • Further improvements in supplier capacity helped shorten average delivery times and ease cost pressures.
  • Input costs fell solidly during the month.
  • Business confidence around the 12-month outlook for output slipped to a seven-month low in May.
Manufacturing business conditions in China improved for the first time in three months during May, according to latest Caixin China general manufacturing purchasing managers’ index (PMI) data.

Production expanded at the quickest rate in nearly a year, supported by a fresh rise in overall new business amid reports of firmer client demand. This in turn contributed to increases in purchasing activity and stocks of inputs.

At the same time, further improvements in supplier capacity helped shorten average delivery times and ease cost pressures.

Notably, input costs fell solidly in May, with firms often passing on savings to clients in the form of lower selling prices.

However, business confidence around the 12-month outlook for output slipped to a seven-month low in May amid concerns over lingering global economic uncertainty.

As a result, firms maintained a cautious approach to staff hiring, with employment falling again in May.

The headline seasonally adjusted purchasing managers’ index (PMI) picked up from 49.5 in April to 50.9 in May—signalling the first improvement in the health of the manufacturing sector since February. Though mild, the pace of improvement was stronger than the post-pandemic average, an official press release said.

Greater intake of new business was central to the latest improvement in output. Though modest, the rate of new order growth was the second-quickest seen over the past two years, with a number of firms noting firmer demand conditions and new customer wins.

New export business increased at a slightly faster pace. Higher new orders prompted firms to raise their buying activity again midway through the second quarter, though the rate of growth slipped to a four-month low. This helped to drive a renewed increased in stocks of purchases.

The improvement in supply chains led to a further easing of cost pressures in May. In fact, average input costs fell solidly for the second month in a row.

Fibre2Fashion News Desk (DS)

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