Index of China’s manufacturing output reports fastest growth in two years

HIGH POINT — A key privately reported index of China’s manufacturing activity showed its strongest gains in two years for the month of May, driven by production increases and new orders.

Caixin/S&P global’s purchasing managers index (PMI) increased to 51.7  from 51.4 in April. Any number above 50 represents growth, while a number under 50 indicates contraction. This index has now been in expansion for seven consecutive months.

“Business conditions in the Chinese manufacturing sector improved at a more pronounced rate midway into the second quarter of 2024. Production growth accelerated amid rising new orders. This led to faster accumulation of backlogged work, while purchasing activity also rose,” the report’s summary stated.

Purchasing activity among domestic Chinese firms in the survey also increased in May, despite the price of material inputs increasing to a seven month high. Firms surveyed reported that they anticipated increasing orders sufficient to cover the higher cost of raw materials.

The Caixin index is of particular interest to international retailers and businesses as it focuses on the country’s export-facing smaller and medium sized firms, which are more interconnected with the global economy than many of the country’s larger state-owned enterprises included in official government figures.

Chinese policy makers have in recent months greatly stepped up their support for high-tech manufacturing as they make a push to revive the country’s flagging exporters and shore up internal demand.

“Currently, China’s economy is generally stable and remains on the road to recovery. This is especially evident from the expectation-beating growth in industrial production in April. … Nevertheless, pressure on employment and weaker demand than supply remain prominent issues. The root cause is overall weak expectations, which have stemmed from a variety of adverse internal and external factors over a long period,” Wang Zhe, Caixin senior economist, noted in the report.

See also:

  • China: Data and the industry agree its furniture presence is in steep decline
  • China’s ruling party to hold key economic policy meeting in July

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