China's manufacturing sector operating conditions worsen in May: PMI

The headline seasonally-adjusted Caixin China general manufacturing PMI posted 48.3 in May, down from 50.4 in April.

Registering below the neutral 50 mark for the first time in eight months, the latest data signalled that manufacturing sector conditions deteriorated midway through the second quarter. Moreover, the reading was the lowest recorded since September 2022.

Manufacturing output dropped alongside a renewed fall in new orders. Export orders also shrank at a faster pace.

In line with reduced operations, Chinese firms cut back on their purchasing activity and lowered their staffing levels. Sentiment towards future output improved, with the first rise in confidence levels in three months.

Charges meanwhile continued to fall, with the rate of reduction accelerating alongside a faster decline in input costs in May.

Incoming new work contracted at the quickest pace in over two-and-a-half years. This was attributed by respondents to deteriorating demand conditions and was partly driven by a second successive monthly decline in export orders.

In line with the reduction in new work, manufacturing output fell for the first time in 19 months. Slower inflows of new work, meanwhile, contributed to a further depletion of backlogged orders in May.

The reduction in capacity requirements further led Chinese manufacturers to scale back headcounts in May, either through redundancies or the non-replacement of job leavers.

A marginal reduction in purchasing activity was observed in May as well, though a renewed–albeit fractional–rise in stocks of purchases suggested that there was an adequate level of pre-production inventory holdings among Chinese goods producers, a release from S&P Global Ratings said.

Stocks of finished goods accumulated for the first time in four months, but only slightly. This was due to both falling sales and delays in outbound shipments of products.

Supplier lead times lengthened marginally for the third month in a row in May 2025.

Average input costs and output charges continued to decline midway through the second quarter this year. Moreover, the rates of reduction accelerated since April.

Finally, sentiment in the Chinese manufacturing sector improved in May. Optimism picked up since April as firms grew more hopeful that trade conditions can improve and the widening of export markets will help to drive sales in the year ahead.

ALCHEMPro News Desk (DS)