China's manufacturing sector experienced its fastest growth in nearly two years this past May, driven by accelerated production and a surge in new orders, according to survey results released by S&P Global on Monday.
The Caixin Manufacturing Purchasing Managers' Index (PMI) rose to 51.7 in May, exceeding expectations and the previous month's reading of 51.4. Analysts had anticipated the index to be at 51.6.
This marks the seventh consecutive month of expansion for the manufacturing sector, achieving its strongest growth in 23 months. Output saw its highest increase since June 2022, notably within the consumer segment, which posted significant growth. This upswing was bolstered by stronger demand from both domestic and international markets.
Manufacturers increased their purchasing activities to meet production requirements and in anticipation of future growth, leading to a rise in stocks of purchases for safety stock purposes. However, inventories of finished goods contracted, attributed to faster outbound shipments aimed at fulfilling orders. Meanwhile, lead times for input deliveries shortened for the third consecutive month.
The survey also revealed that the backlog of work accumulated at the fastest pace since September 2021, driven by rising inflows of new work.
Employment in the sector continued its decline, marking the ninth straight month of contraction in the labor market.
On the pricing front, average input costs escalated due to rising prices of metals, plastics, and energy, with input price inflation reaching its highest rate since last October. Average output prices, however, remained relatively stable in May. Some firms chose to pass on rising costs to customers, while others suppressed prices to maintain competitiveness.
Sentiment among Chinese manufacturers remained positive, with many expressing hope for improved market demand both domestically and abroad.
Wang Zhe, Senior Economist at Caixin Insight Group, noted that China's economy is generally stable and continues on its path to recovery.
