China PMI Comes In Above Expectations

Investing.com – Economic activity picked up in China in May with the official Purchasing Managers’ Index (PMI) for both manufacturing and services rising and beating expectations.

China reported Thursday morning that the official manufacturing for May rose to 51.9 (with a number above 50 signalling expansion). The market had been expecting a drop to 51.3 for the month from 51.4 in April. The May reading is the highest in seven months.

But it was the continued expansion of the services PMI that attracted more attention. The rose to 54.9 in May from 54.8 a month earlier, suggesting China’s efforts to shift the economy away from an overreliance on manufacturing and to focus more on services are bearing fruit.

Services already make up about half of the second-largest economy in the world.

A composite PMI – which covers both manufacturing and services – increased from 54.1 in April to 54.6 in May.

The data was released a day and a half after the U.S. announced it would impose 25% tariffs on US$50 billion worth of Chinese imports. The White House said a list of the products affected will be released June 15. The U.S. also announced plans to limit Chinese investments in U.S. technology two weeks after that.

The on-again-off-again trade war between the U.S. and China has, so far, had limited impact on the Chinese economy, at least judging by the official PMI which is published by the National Bureau of Statistics (NBS) and focuses on large and state-owned enterprises.

The market will now be watching for the release Friday of the Caixin / HIS Markit PMI that is more focused on small and medium-sized enterprises.

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