Explainer | What does China’s manufacturing, services activity from May say about the economic outlook?
- China’s official manufacturing purchasing managers’ index (PMI) fell further into contraction in May, but the Caixin/S&P Global gauge returned to expansion last month
- China’s official non-manufacturing PMI expanded at a slower pace last month, while the Caixin/S&P Global gauge grew faster
Purchasing managers’ indices (PMIs) are economic indicators derived from monthly surveys. They provide an early indication each month of economic activities in the manufacturing and services sectors. The services sector includes construction.
A reading above 50 represents an expansion when compared with the previous month, while a reading below 50 represents a contraction. A reading of 50 indicates no change.
So, what do the recent figures say about the state of the world’s second-largest economy?
Mixed manufacturing
Within the official manufacturing PMI, the new-orders subindex fell to 48.3 in May from 48.8 in April, while the new-export-orders subindex fell to 47.2 from 47.6.
Analysts from HSBC said the “deeper contraction” in the manufacturing PMI, compared with the non-manufacturing gauge that fell to 54.5 from 56.4, “showed an ongoing divergence in the recovery between services and manufacturing”.