China: Manufacturing PMI shrank – ING

Iris Pang, economist at ING, notes that China's official manufacturing PMI for May fell into contraction territory with a reading of 49.4, suggesting that manufacturing activity actually shrank after April's reading of 50.1.

Key Quotes

“The most eye-catching sub-index is the "new orders index", which measures domestic manufacturing activity. This came down drastically from 51.4 in April to 49.8 in May.”

“We believe that the contraction in new orders means domestic manufacturing activity has been affected by both the trade war and the technology war. From the trade war, export-related domestic activity, like packaging materials, are affected by fewer exports. And, the damage on China’s telecommunication companies has slowed down their production in China as they foresee slower sales globally.”

“We believe that a contraction trend in manufacturing activity has formed as the manufacturing PMI has now fallen 3 months in a row and now even enters contraction territory.”

“In any case, the central government is not going to use the yuan as a weapon to fight the trade war and the technology war.”