China Economy

A private manufacturing index shows steady growth in China

Key Points
  • The Caixin/Markit China manufacturing Purchasing Managers' Index for May showed steady growth in the world's second-largest economy.
A textile worker at a factory in Nantong city, located in the Jiangsu province, China.
VCG | Getty Images

A closely watched measure of China's economy was released Friday morning as Caixin and IHS Markit released their manufacturing Purchasing Managers' Index (PMI) showing steady growth in the world's second-largest economy.

The private Caixin/Markit PMI came in at 51.1 for May, unchanged from April.

Economists polled by Reuters had expected the Caixin/Markit index to fall slightly to 51.0 in May from April.

A reading above 50 indicates expansion, while a reading below that signals contraction.

Even though the May survey pointed to just a modest expansion of China's manufacturing sector, production growth and new orders picked up slightly from April, Caixin and Markit said in a joint press release. New export sales fell, however, they added.

"Overall, operating conditions across the manufacturing sector remained stable. The growth in the price of industrial products has gained momentum, however, the export situation was still disappointing," wrote Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.

On Thursday, China reported that factory activity grew more than expected in May, with the official manufacturing PMI coming in at 51.9 — the highest level since October 2017.

Economic data from China is being closely watched amid trade tensions between Beijing and Washington as President Donald Trump zooms in on America's trade deficit with the world's second-largest economy.

Earlier this week, the White House announced it would have a final list of $50 billion in imports that would be subject to 25 percent tariffs by June 15, and two weeks later would announce investment restrictions on Chinese acquisitions of U.S. technology.

China's official PMI gauge focuses on large companies and state-owned enterprises, while the reading by Caixin and IHS Markit focuses on small and medium-sized enterprises.

Capital Economics senior China economist Julian Evans-Pritchard wrote in a note Thursday that the Caixin/Markit index is a better guide to cyclical trends than the official gauge. He added that the two indices only move in the same direction 60 percent of the time.