China’s factories sustain 6-month growth run as cost pressures ease

PMI stayed above the 50-point threshold.

China’s manufacturing sector maintained solid momentum in May, extending its expansion to a sixth consecutive month even as growth moderated slightly and global supply-chain strains continued to bite.

The headline RatingDog China General Manufacturing Purchasing Managers’ Index edged down to 51.8 in May from 52.2 in April, remaining comfortably above the 50-point threshold that separates expansion from contraction. Despite the slight softening, the reading stayed well above the long-run survey average of 50.8 recorded since tracking began in 2004.

Demand for Chinese manufactured goods held up strongly. Although the pace of new order growth eased from April, it remained amongst the highest registered over the past five years. Manufacturers attributed the buoyancy to firmer market conditions, product improvements, new customer acquisitions and promotional activity. Export orders, however, dipped slightly during the month, adding a note of caution to an otherwise resilient domestic picture.

Output expanded for a further month, with the rate of growth — whilst easing from April’s 22-month high — ranking as the third-strongest since the second half of 2024. Rising order books translated into a fourth successive monthly increase in backlogs of work, though the pace of accumulation remained below the long-run trend.

Employment slipped marginally in May, with the overall workforce contracting only modestly. Consumer goods firms bucked the broader trend, continuing to take on staff.

The most notable development in the latest survey was a broad easing of inflationary pressures. Input price inflation fell on a monthly basis for the first time in six months, whilst output price inflation eased for the first time in seven. Manufacturers nevertheless cautioned that input costs were still rising at a rate faster than the long-run average, citing higher prices for raw materials and energy, supply-chain disruption and the impact of ongoing international conflicts.

Supply chains themselves remained under strain. Supplier delivery times lengthened for a third consecutive month, though the degree of delay was described as modest. In response, purchasing activity rose for a fifth successive month, and stocks of inputs expanded for the sixth month running as manufacturers built buffers against further disruption.

Business confidence remained broadly positive. Optimism over the twelve-month output outlook moderated slightly from April but was in line with the average recorded across the year to date. Firms pointed to anticipated growth in market demand, rising orders, new client development and improved sales channels, as well as new product launches and advances in production capacity.

“The manufacturing sector sustained its expansion in May, albeit at a slower pace,” said Yao Yu, founder of RatingDog. “The easing of inflationary pressures provided some relief to firms’ cost and pricing environments. However, the continued moderation in demand growth and the softening of external orders are key risks warranting attention.”

The RatingDog China General Manufacturing PMI is compiled by S&P Global from monthly responses by purchasing managers at approximately 650 Chinese manufacturers, with data collection conducted in the second half of each month.