Manufacturing sentiment continued to rise in May, the supply side expansion accelerated, while the demand side expansion slowed down.

The Caixin China Manufacturing Purchasing Managers’ Index (PMI) for May 2024, released on June 3, recorded 51.7, up 0.3 percentage points from April and the highest since July 2022, indicating an acceleration in the expansion of manufacturing production and operating activities.

SR489-P5-LO-A20-E The manufacturing PMI released by the National Bureau of Statistics recently recorded 49.5 in May, down 0.9 percentage points, falling back into contraction territory after two consecutive months of expansion.

According to the sub-data of Caixin China Manufacturing PMI, the supply and demand of the manufacturing industry continued to expand in May, and the production index rose to a new high since July 2022, of which the production of consumer goods grew strongly. The new orders index fell slightly in the expansion range, the expansion of external demand slowed down significantly, and the new export orders index slowed down significantly in the month, but it was still above the critical point.

Employment at manufacturing companies remained cautious, with the employment index rising slightly in contraction in May, and employment at consumer goods manufacturing companies even increased slightly. The survey shows that the contraction of employment is generally related to the failure of enterprises to fill vacancies after personnel leave and the improvement of production efficiency.

With the increase in new orders and the decrease in employment, the backlog of business increased for three consecutive months, and the backlog of business index rose to the highest since October 2021 in May, and enterprises chose to consume finished goods inventory to meet the demand for new orders, resulting in the inventory of finished goods index falling back to the contraction range again in May. The market condition is good, enterprises are more willing to purchase, the purchasing volume index rose to a new high in nearly three years in the expansion range, and the raw material inventory index in the month was the same as in April, in the expansion range.

SR489-P5-LO-A20-E The prices of raw materials such as metals and crude oil continued to rise, driving the purchasing price index of raw materials in the manufacturing industry to continue to rise in May, which has been higher than the critical point for two consecutive months. Competition at the sales end is fierce, some enterprises cut prices to promote sales, and the factory gate price index for the month is still in the contraction range, but it rose slightly from April, indicating that corporate earnings continue to be under pressure.

The manufacturing market confidence was relatively stable, and the production and operation expectation index rose slightly in the expansion range in May. Respondents said that growth expectations are mainly related to the recent recovery in domestic and international market demand, but also due to the introduction of new products, technological advances and capacity expansion.

Caixin Intelligence Group senior economist Wang Zhe said that in May, the prosperity of the manufacturing industry remained good, the supply, domestic demand and exports expanded to varying degrees, enterprises maintained optimism, but the price level was still low, especially the sales price continued to be low, manufacturing employment contracted for several months, and enterprises were cautious in expanding their staff. Employment pressure is too large, demand is weaker than supply is still a prominent problem facing the current economy, the reason is still weak overall social expectations, which is caused by the superimposed impact of a variety of external adverse factors in the past for a long time. The problems that have accumulated over a long period of time need to be solved in the long run, and the policies aimed at stabilizing the economy, boosting domestic demand and creating jobs should be strengthened and maintained in a consistent and continuous manner.