China's manufacturing sector activity maintained its modest expansion in May as production and new orders saw slight gains but new export sales reportedly fell further, data from Caixin and IHS Markit showed.
Adjusted for seasonal factors, the Caixin/Markit Manufacturing Purchasing Managers' Index was unchanged at 51.1 in May. A reading above 50 signals expansion.
Operating conditions in China's manufacturing sector have strengthened for 12 straight months as growth in production and new orders picked up slightly from April.
However, the index for new export orders remained in contraction territory despite a pick-up in May, "reflecting that the export situation was still grim," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.
Manufacturers reduced staffing levels at a faster clip in May to reduce costs and boost efficiency, leading to higher work backlogs.
Cost pressures intensified during the month on the back of higher raw material prices for chemicals, metals and oil, which resulted in factory output prices climbing to its fastest pace so far in 2018.
"The indices for output charges and input prices both rose, showing that product supply got tighter and price pressures remained high, which can help boost manufacturers' profits," said Zhong.
Companies were optimistic that output would increase over the next 12 months amid expectations of rising client demand and new product launches, but the sentiment is weaker than the series average.
The Caixin-Markit gauge tracks smaller, private companies, while the official indicator, which rose to 51.9 in May from 51.4 in April, focuses on larger, state-owned companies.
