China business outlook drops to lowest level on record amid US trade war, May’s Caixin PMI report shows

Combined expectations among Chinese manufacturing and service-sector companies for the year ahead – particularly smaller, private-sector firms – dropped to the lowest level on record in May as the escalating US-China trade war eroded firms’ confidence, according the latest Caixin Purchasing Managers’ Index published on Wednesday.

The future outlook among manufacturing firms alone weakened to it lowest level since April 2012 when the series began, while service providers remained the least confident in the outlook for the economy and their businesses since July 2018, according to the index.

“Subdued expectations were often linked to the ongoing China-US trade dispute and relatively subdued global demand conditions,” said the section of the report specifically relating to future outlook.

The Caixin Composite Index, which focuses on current conditions in both the manufacturing and service sectors, dropped from 52.7 in April to 51.5 in May, but remained in expansionary territory, signalling further growth in the Chinese economy. The May decline was much larger than expected by analysts.

The decline in the composite index was due to a weaker service sector, which dropped sharply from 54.5 in April to 52.7 in May, while the manufacturing index remained stable in May at 50.2.