Manufacturing and non-manufacturing PMI expansion both accelerate in May -

Supply and demand both pushing forward, fast pace of transformation

In May, China's manufacturing purchasing managers' index (PMI) stood at 51.9%, 0.5 percentage points higher than the previous month. Experts believe that, from the main sub-indices, the main indices such as supply and demand all rose, significantly higher than the same period last year. On the whole, the economy's endogenous momentum has increased, quality has continued to improve, resilience against short-term fluctuations has increased and the overall operating trend is solid -

In May, the manufacturing purchasing managers' index (PMI) was 51.9%, 0.5 percentage points higher than the previous month, with the overall expansion of the manufacturing sector accelerating; the non-manufacturing business activity index was 54.9%, up 0.1 percentage points from the previous month, with the non-manufacturing sector continuing its overall The non-manufacturing industry in general continued the momentum of steady and rising development.

Experts said that in May, the manufacturing PMI index increased slightly, manufacturing enterprises are more active in production and operation activities, the overall operating trend is stable; service industry to maintain good development, economic operation stability enhanced. Overall, the economy is expected to continue to maintain a steady growth trend in May, but should continue to pay attention to the impact of rising input prices to the middle and lower reaches of the industry.

Manufacturing PMI at 8-month high

In May, the manufacturing PMI stood at 51.9%, 0.5 and 0.7 percentage points higher than the previous month and the same period last year respectively, a high since October 2017, which indicates that the pace of manufacturing expansion has accelerated and the momentum of development has further strengthened.

Zhao Qinghe, a statistician at the National Bureau of Statistics Service Industry Survey Centre, analysed that in May, the supply and demand sides of the manufacturing industry made concerted efforts to increase market activity, with the production index and new orders index at 54.1% and 53.8%, respectively 1.0 and 0.9 percentage points higher than the previous month, rising to a yearly high.

In terms of structure, the equipment manufacturing and high-tech manufacturing PMIs stood at 53.0% and 54.8% in May, up 1.3 and 1.0 percentage points respectively from the previous month, and both consistently above the overall level of the manufacturing sector. The consumer goods manufacturing PMI was 52.7%, basically unchanged from the previous month, with a stable trend. This indicates that the pace of transformation and upgrading of the manufacturing industry has accelerated, and the support role of new kinetic energy continues to be enhanced.

"The prosperity of traditional industries rebounded, and the production and operation of enterprises improved." Zhao Qinghe said that in May, the high energy-consuming manufacturing PMI was 50.5%, back in the expansion range, with the PMI of ferrous metal smelting and rolling processing industry rising to a recent high.

"Supply and demand and other major indices have risen, significantly higher than a year ago. On balance, the economy's endogenous momentum has increased, the quality has continued to improve, the resilience against short-term fluctuations has increased and the overall operating trend is sound." Chen Zhongtao, an expert at the China Logistics Information Center, said.

It is worth noting that the manufacturing price index rose significantly due to factors such as the rebound in market demand and rising international commodity prices. in May, the purchase price index of major raw materials and the ex-factory price index were 56.7% and 53.2%, up 3.7 and 3.0 percentage points respectively over the previous month, and 7.2 and 5.6 percentage points higher than the same period last year.

The survey results also showed that the proportion of manufacturing enterprises reflecting capital constraints was 40.1% in May, up for the third consecutive month, and the support of financial services for the real economy still needs to be further enhanced. Meanwhile, the proportion of enterprises reflecting high raw material costs and labour costs both continued to exceed 40%, with higher cost pressure still one of the main problems in production and operation of enterprises.

Non-manufacturing PMI rises continuously

In May, the non-manufacturing business activity index was 54.9%, up by 0.1 and 0.4 percentage points from the previous month and year-on-year respectively. This is also the third consecutive month that the non-manufacturing PMI has maintained its upward momentum, indicating that the non-manufacturing industry in general continues to develop steadily.

"The non-manufacturing business activity index rose for 3 consecutive months from a year earlier and has been running at a higher level of 54% or above for 9 consecutive months, indicating that the stability of the non-manufacturing sector's continued positive development is increasing." Wu Wei, an expert at the China Logistics Information Centre, said.

In the individual indices, input prices, employees and supplier delivery time index rose, by 0.2-1.5 percentage points; sales price index was flat; new orders, new export orders, orders in hand, inventory and business activity expectations index fell, by 0.1-0.9 percentage points. 0.9 percentage points.

In the non-manufacturing sector, the business activity index for the service sector was 54.0% in May, up 0.2 percentage points from the previous month and the second highest point of the year, with consumption playing a more significant role in driving growth in the service sector.

Looking at the broad industry categories, the business activity index for industries closely related to consumption, such as air transport, postal express, telecommunications and internet software, continued to be in the high boom range of 60.0% or above, with strong expansion momentum; the business activity index for traditional industries such as retail and accommodation was higher than the overall level of the service sector. The business activity indices of capital market and residential services industries were below the critical point, and the total business volume fell back. From the perspective of market demand, the new orders index was 50.4%, up 0.1 percentage point and above the critical point for two consecutive months, with market demand maintaining expansion.

According to Cai Jin, vice president of the China Federation of Logistics and Purchasing, in May, the service industry business activity index rose for two consecutive months, and the average value from January to May was better than the same period last year. The positive development of the service industry is more conducive to the optimization of China's economic structure and the continued release of new momentum, which in turn creates better basic conditions for improving the quality of economic development, while enhancing the stability of economic operations.

Affected by heavy rainfall and flooding in some areas, the business activity index for the construction industry stood at 60.1% in May, down 0.5 percentage points from the previous month, but still in the high expansion range of 60.0% or above for three consecutive months, with production and operation in the construction industry remaining active. From the perspective of market expectations, the business activity expectation index was 65.1%, continuing to be in the high boom range, with enterprises' confidence in the future market still strong.

Rising input prices cause for concern

In May, the composite PMI output index was 54.6%, 0.5 percentage points higher than the previous month, indicating that the overall pace of expansion of China's enterprise production and operation activities has accelerated. Among them, constitute the comprehensive PMI output index of manufacturing production index and non-manufacturing business activity index of 54.1% and 54.9%, both up from the previous month, the manufacturing production index rose higher than the non-manufacturing business activity index this month.

From the future trend, manufacturing enterprises production and operation activities expectation index, maintain a relatively high level, steady rise. 58.7% in May, up 0.3 percentage points from the previous month, higher than the same period last year 1.9 percentage points. Purchasing activity was more active, with the purchasing volume index reaching 53%, 1.5 percentage points higher than the same period last year.

Chen Zhongtao pointed out that in recent years, the country focuses on stabilizing the economic situation, promoting supply-side structural reform, focusing on stimulating market vitality, enhancing economic growth momentum, improving the quality of economic development, comprehensive measures to introduce a series of policy measures, policy effects have emerged one after another, the economic operation of positive factors thickly planted, unstable factors and risk factors have been effectively controlled, the economic operation this year has shown a stable momentum, strong momentum, the This year, economic operation has shown a stable momentum, strong momentum, excellent structure and good quality of development.

The PMI index has been fluctuating slightly above the Rong Kuk line since 2017, which may be a new feature of its operation. Overall, the economy is expected to continue its steady growth trend in May.

In response to the recent rise in both the purchase price index and the factory price index, Chen Zhongtao said that in May, the gap between the two, the manufacturing purchase price index and the factory price index, tended to narrow, from more than 9 percentage points in 2017 to the current 3 percentage points or so, reflecting that the upstream and downstream enterprises in the supply chain are synergistic development and win-win development trend, but we should pay attention to the upstream and downstream products linkage, prices together, and Increase inflationary pressure.

From the non-manufacturing sector, in May, the non-manufacturing business activity expectations index was 61%, down 0.5 percentage points from the previous year.

"Comprehensive index changes seem to indicate that the current market supply and demand, employment and price growth continue to be stable, the momentum of business operations is improving, and the stability of the non-manufacturing sector's continued positive development is further enhanced." Wu Wei said.

Wu Wei also pointed out that in May, the input price index rose by 1.5 percentage points from a year earlier to 54.2 per cent, a new high for the year, indicating that input price increases have accelerated. The recent sustained rise in international crude oil prices, driving up domestic oil prices, was the main reason for the accelerated rise in input prices.

From the specific industry, the construction industry, road transport and air transport industry, such as input price index rose more, obviously manifested in the rise in transport costs. From the situation reflected by enterprises, the proportion of reflecting the issue of rising transport costs rose to 13.4%, up 0.8 percentage points from the previous month. The rise in oil prices also brought about the problem of tight supply of energy and other raw materials. The enterprise survey showed that the proportion of those reflecting this problem tended to rise month by month, reaching 7.16% this month, a record high for the year. Therefore, we should continue to pay attention to the rising trend of input prices and be wary of the inflationary pressure brought to the market by their continued and excessive rise.