China private factory gauge plunges to weakest in over 2 years despite tariff reprieve
The picture painted by more export-oriented Caixin survey gloomier than official PMI reading released last week. PHOTO: AFP
BEIJING – China's manufacturing activity fell to the weakest level since September 2022, according to a private survey, as improved trade flows proved insufficient to shore up an economy still under pressure from weak domestic demand.
The Caixin manufacturing purchasing managers' index (PMI) fell to 48.3 last month from 50.4 in April, according to a statement released by Caixin and S&P Global on June 3, well below the 50 mark separating expansion from contraction. The figure is below every estimate in a Bloomberg survey of analysts, whose median was 50.7.
The results were weaker than the official PMI reading released on May 31, which showed manufacturing contracted at a slower rate after the reprieve on tariffs unclogged trade flows.
'Manufacturing supply and demand declined, dragged by overseas demand,' senior economist Wang Zhe at Caixin Insight Group said in a statement. 'Major macroeconomic indicators showed a marked weakening at the start of the second quarter. The downward pressure on the economy has significantly intensified compared to preceding periods'
The picture painted by the more export-oriented Caixin survey, offers another glimpse of how factories adjusted in the initial aftermath of the trade ceasefire, after China and the United States agreed to reduce tariffs for 90 days beginning from May 14.
A renewed fall in new orders accompanied a decline in manufacturing output, according to the report. Companies reduced their purchasing activity and cut staffing levels, although sentiment towards future output improved, it said.
The prospects for manufacturing in the months ahead are still in question, given an uncertain export outlook, and especially as tensions rose again in recent days between the world's two biggest economies.
The Caixin results have tended to be higher than those from the official poll over the previous year as exports stayed strong. The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and medium-sized firms in the non-state sector.
'The trade environment remains highly uncertain,' said Mr Raymond Yeung, chief economist for Greater at Australia & New Zealand Banking Group. 'The key remains on property, which is still sluggish with no sign of recovery'. BLOOMBERG
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