Chinese manufacturing conditions markedly improve midway into Q2 2024

Production growth in the country accelerated amid rising new orders. This led to faster accumulation of backlogged work, while purchasing activity also rose.

Firms were hesitant to hire additional workers in the quarter however, even as sentiment about the outlook improved.

Meanwhile input price inflation climbed to a seven-month high during the quarter. Average selling prices were little changed whilst there was a renewal of export charge inflation in May, S&P Global said in a release.

The headline seasonally adjusted purchasing managers’ index (PMI), a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy, rose to 51.7 in May, up from 51.4 in April. This indicated a seventh successive monthly improvement in the health of the sector. Moreover, the rate of growth was the fastest in 23 months.

Manufacturing production rose at the fastest pace since June 2022, with firms in the consumer segment reporting especially sharp output growth in May.

This was underpinned by higher new work inflows, as stronger demand, both within the country and abroad, supported by heightened interests in new products led to the latest rise in new orders. The rate of new order expansion slowed slightly from April, however.

Purchasing activity also increased in May as firms sought to acquire more inputs to fulfil ongoing production requirements and in anticipation of output growth.

Backlogged work, meanwhile, accumulated for a third month in a row and at the quickest pace since September 2021 amid rising new work inflows. Firms remained hesitant to take on additional workers, however, as reflected by falling employment levels, albeit at a slower rate compared to April.

Average input costs continued to increase for Chinese manufacturers in May. The rate of input price inflation was the highest since last October, despite being modest.

Average output prices were little changed in May. Whilst some firms were keen to share their rising cost burdens with clients, others continued to suppress charges to remain competitive. An increase in average export charges was also observed for the first time in three months.

Sentiment among Chinese manufacturers remained positive in May. Panelists hoped that market demand can improve both locally and abroad to support higher production in the year ahead. The level of confidence also improved from April.

Fibre2Fashion News Desk (DS)