China's manufacturing sector experienced an unexpected contraction in May, signaling continued economic challenges. A private survey revealed that the Caixin manufacturing purchasing managers index (PMI) dropped to 48.3, falling below the 50 mark that separates expansion from contraction.
This figure, released by Caixin and S&P Global on Tuesday, represents the lowest PMI reading since September 2022. The contraction highlights that improved trade flows have not been sufficient to offset the pressure from weak domestic demand within the Chinese economy.
The result was a surprise to economists, who had forecasted a median of 50.7. The data suggests that China's economic recovery faces headwinds, requiring further policy attention to stimulate domestic consumption and support manufacturing activity.