Operating conditions in the Chinese manufacturing sector improved marginally in May as new work and export sales increased, but trade tensions cast a shadow on factories' confidence, according to a private survey by Caixin and IHS Markit.
The seasonally adjusted Caixin purchasing managers' index for the Chinese manufacturing sector stood at 50.2 in May, unchanged from the previous month and above the Econoday consensus estimate of a 50 reading, which would have meant that operating conditions stalled.
In contrast, the official manufacturing PMI recently released by the country's National Bureau of Statistics dropped to 49.4 in May from 50.1 in April, signalling a contraction in Chinese manufacturing activity.
New orders grew at a faster rate since April as new export sales increased amid new product releases and stronger overseas demand, the Caixin survey showed. Production was stable following a slight increase in April, while inventories of finished goods declined for the second straight month.
Purchasing activity rose for the first time in five months, though only slightly, amid a rise in new business. However, business sentiment slipped to the lowest on record amid concerns of mounting trade tensions between the U.S. and China and signs of softer global demand.
"The trade tensions between the U.S. and China are having an impact on confidence and the best way to respond to this is to boost the confidence of enterprises, residents and capital markets by carrying out favorable reforms and to undertake timely adjustments to regulations and controls," wrote Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.