A survey from Caixin Insight Group showed that China’s manufacturing activity shrank to its lowest level since September 2022. The index also fell below the 50-level mark, which indicates it has entered into contraction for the first time since September.
According to the report, the sharper decline in new export orders reflected the impact of U.S. trade policies. The Caixin/S&P Global manufacturing purchasing managers’ index hit 48.3 in May, missing Reuters’ median estimate of 50.6 and plummeting from 50.4 in April.
China’s manufacturing sector shrinks for the second consecutive month
The research firm noted that both supply and demand declined as market conditions worsened. Manufacturing output also recorded its first contraction in 19 months, dropping at the fastest rate since November 2022.
Caixin noted that the decline in foreign demand accelerated in May, with the new export orders falling to their lowest level since July 2023. The country’s total new orders, which indicate overall demand, also contracted for the first time in eight months.
According to the survey, employment dropped, with the job market shrinking faster than in April, marking the eighth instance of a decline in employment in the past nine months. Caixin also noted that business optimism recovered slightly from April’s low despite declining employment.
“Uncertainty in the external environment has increased, adding to domestic economic headwinds. Major macroeconomic indicators showed a marked weakening at the start of the second quarter. The downward pressure on the economy has significantly intensified compared to preceding periods.”
–Wang Zhe, Senior Economist at Caixin Insight Group.
The firm’s analysis came after the official PMI was released on Saturday, which showed China’s manufacturing activity contracted for a second month in May. The gauge was slightly higher at 49.5 from 49 in April, reflecting early signs of stabilization in the sector. The PMI reading was also in line with Reuters’ expectations.
Economists at Goldman Sachs said in a Tuesday note that the divergence between the official and Caixin PMI readings may be partly driven by the surveys’ timing differences. The economists argued that Caixin PMI respondents may not have felt the effect of the tariff de-escalation at the time of the survey.
According to Goldman Sachs, the Caixin survey is conducted mid-month, earlier than the NBS survey compiled at month-end. The financial institution also noted that the private survey covers a smaller sample of over 500 mostly export-oriented firms, while the official PMI samples 3,000 companies and aligns more closely with industrial output.
According to LSEG data, the official non-manufacturing PMI covering services and construction dropped to 50.3 in May from 50.4 in April, maintaining a level above 50 since January 2023. Caixin services purchasing managers’ index for May is due June 5.
U.S. tariffs weigh in on China’s trade
On Friday, U.S. President Donald Trump reignited tensions in international trade after accusing Beijing of violating a two-way deal to roll back tariffs and announced a doubling of worldwide steel and aluminum tariffs to 50%. Zhiwei Zhang, chief economist at Pinpoint Asset Management, argued that recent developments between China and the U.S. suggest that bilateral relations are not improving.
Zhang said that companies in China and the U.S. exposed to international trade have to run their business under persistent uncertainty. She believes that it will weigh on the growth outlook in both countries.
Trump paused 145% levies on Chinese imports – most of which took effect in April for 90 days – after negotiations between the U.S. and Chinese top trade representatives in Switzerland last month. Research from the Peterson Institute for International Economics showed that U.S. tariffs on goods imported from China are now down to 51.1%, while China’s levies on U.S. imports stand at 32.6%.
Beijing’s industrial output, which measures the value of goods produced, rose at a slower pace of 6.1% year on year in April compared with a 7.7% jump in the previous month. China’s exports also increased 8.1% in April from a year earlier, as businesses’ increased shipments to Southeast Asian nations made up for the sharp drop in goods sent to the U.S.
Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now
This articles is written by : Nermeen Nabil Khear Abdelmalak
All rights reserved to : USAGOLDMIES . www.usagoldmines.com
You can Enjoy surfing our website categories and read more content in many fields you may like .
Why USAGoldMines ?
USAGoldMines is a comprehensive website offering the latest in financial, crypto, and technical news. With specialized sections for each category, it provides readers with up-to-date market insights, investment trends, and technological advancements, making it a valuable resource for investors and enthusiasts in the fast-paced financial world.
