China’s factory activity growth hits 2-year high, Caixin PMI shows By Reuters

BEIJING (Reuters) – China’s manufacturing activity in May grew at the fastest pace in about two years with strong production and new orders, a private sector survey showed on Monday, indicating the sector remains robust amid supportive industrial policies.

The Caixin/S&P Global manufacturing PMI rose to 51.7 in May from 51.4 the previous month, marking the fastest pace since June 2022 and beating analysts’ forecasts of 51.5. The 50-point mark separates growth from contraction.

The reading contrasts with an official survey on Friday that showed a surprise fall in manufacturing activity, pointing to a mixed picture of the sprawling industry.

The Caixin survey is believed to be skewed more towards smaller, export-oriented firms than the much broader official PMI.

Output rose at the fastest pace since June 2022, with firms in the consumer segment reporting sharp growth in May.

Production was underpinned by higher new work inflows, as stronger domestic and global demand supported client interest in new products, according to respondents.

New export orders, however, grew at a much slower pace compared with April’s 41-month high. Some respondents said recent trade fairs had led to new work, while others referred to their strategic expansion into overseas markets. But a lacklustre global economy remains a constraint.

“It will take time to find solutions to these accumulating problems,” said Wang Zhe, senior economist at Caixin Insight Group. “Policies aimed at stabilising the economy, boosting domestic demand and increasing employment need to be strengthened and consistent.”

To meet ongoing production requirements, factories stepped up their purchasing activity, with the quantity of purchases accelerating at the fastest pace in three years.

Sentiment among producers improved from April as they expected market demand to improve both at home and abroad.

Rising metals, plastics and energy prices led to an increase in average input costs. The rate of input price inflation was the highest since last October.

However, employment remained weak, staying in contractionary territory for the ninth consecutive month. The rate of job losses slowed, with makers of consumer goods even recording a slight rise in staffing levels.

China’s economy has been squeezed by a protracted property crisis, which has weighed on business and consumer confidence.

The International Monetary Fund last week lifted its forecast on China’s 2024 economic growth to 5% from an earlier forecast of 4.6%.