China: Manufacturing and non-manufacturing PMIs remain muted in May
Latest reading: China’s official NBS Manufacturing PMI slipped to 50.0 in May 2026 from 50.3 a month earlier, in line with market expectations. The reading indicated that manufacturers continued to face pressure from weak domestic demand and higher input costs linked to the ongoing Middle East conflict. Output growth slowed to a three-month low, while new orders contracted after two months of expansion. Foreign orders also declined following a modest rise in the previous month. Employment remained weak, and purchasing activity fell for the first time in three months.
The Non-Manufacturing PMI increased to 50.1 in May 2026 from 49.4 in April, exceeding market expectations of 49.5 and moving back into expansion. The rebound reflected stronger activity across both services and construction. Demand conditions showed signs of stabilization, as new orders declined at a slower pace, while new export orders improved but stayed in contraction. Employment remained soft despite a marginal increase, while input cost inflation picked up.
Panelist insight: Commenting on the data, Nomura analysts said:
“We view the improvement in the non-manufacturing PMI with caution, as underlying structural headwinds from the property sector continue to weigh on household spending on entertainment and catering services, as well as construction activity. Following a broad-based disappointment in April activity data, we expect weakness in growth to be sustained in May, due to supply constraints from the Middle East blockade, which is affecting the oil and chemical sectors, payback effects from the durable goods trade-in program, the continued property drag and a lack of forceful policy support. Despite robust export growth, the AI boom, a rise in headline inflation readings and no policy rate cut, domestic demand has been so weak that government bond yields are steadily drifting lower and sharply diverging from global peers.”