China’s factory activity slowdown became evident in May, as new data showed shrinking manufacturing output. The key phrase China’s factory activity slowdown highlights how ongoing US tariffs are beginning to weigh heavily on the country’s manufacturing sector. According to the Caixin/S&P Global manufacturing PMI, factory activity fell to 48.3 in May, down from 50.4 in April. This marked the first contraction in eight months and was the lowest reading in 32 months. The figure missed analysts’ expectations and clearly signals a slowdown.
Furthermore, the 50 mark separates growth from contraction, so this decline confirms a weakening factory output. The official Chinese PMI, released earlier, also showed factory activity shrinking for the second consecutive month. This decline comes amid uncertainty created by the ongoing trade war, even after a temporary truce between the US and China. In addition, a recent US federal appeals court temporarily reinstated major tariffs, further dampening the outlook.
Moreover, the Caixin survey revealed that new export orders dropped for the second month in a row. Export demand fell at the fastest pace since July 2023. Manufacturers cited US tariffs as the main reason for subdued global demand. As a result, overall new orders declined to the lowest level since September 2022. Factory output also contracted for the first time since October 2023.
Employment in manufacturing decreased sharply, with firms reducing headcount amid the downturn. Output prices dropped for six consecutive months, reflecting intense competition and pricing pressures in the market. For instance, the auto industry in China faces a severe price war, raising concerns about a market shake-out.
Economist Robin Xing from Morgan Stanley noted that the situation underscores ongoing supply-demand imbalances driving deflation. He pointed out that while there is talk of economic rebalancing, the traditional supply-driven model still dominates, making a quick recovery unlikely.
On the bright side, export charges rose for the first time in nine months due to rising logistics costs and tariffs. Businesses showed increased optimism about future output, expecting improvements in trade conditions and market growth.
In summary, China’s factory activity slowdown reflects mounting challenges from US tariffs and weak demand. The situation continues to test China’s economic resilience as manufacturers navigate uncertainty.
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