China Manufacturing PMI Declines, Non-Manufacturing PMI Improves

Overview

This report analyzes the official manufacturing and non-manufacturing PMI data for May 2026 in China. The report shows that the manufacturing PMI fell to 50.0, below the expected level of 50.0; meanwhile, the non-manufacturing PMI rose to 50.3, exceeding market expectations. The report notes that the new orders sub-index for manufacturing slipped back into contraction territory, while the supplier delivery efficiency sub-index declined, reflecting supply-side distortions. The improvement in the non-manufacturing PMI was mainly driven by services and construction.

Core views

According to data from the National Bureau of Statistics, China’s official manufacturing PMI in May 2026 stood at 50.0, down from April’s 50.3—a figure in line with market expectations (consensus: 50.0; Nomura: 49.9). At the same time, the non-manufacturing PMI reached 50.3, higher than market expectations of 49.5, largely due to improvements in services and construction. The decline in the manufacturing PMI was primarily driven by a drop in the new orders sub-index into contraction territory, as well as a decrease in the supplier delivery efficiency sub-index from 49.5 to 49.2, which reflects supply-side distortions. As this sub-index accounts for 15% of the overall index, its decline mechanically pushed the overall manufacturing PMI up by 0.05 percentage points. After adjusting for these distortions, the core PMI still remained below the critical threshold of 50. The improvement in the non-manufacturing PMI was fueled by services and construction—but the report noted that structural pressures in the real estate sector continued to curb household spending on entertainment and dining services, as well as construction activities. Furthermore, the report pointed out that, due to supply constraints caused by Middle Eastern lockdowns, the lingering effects of the durable goods trade-in program, the drag from real estate, and the lack of strong policy support, growth in May is expected to remain sluggish. Although exports grew strongly, AI-driven momentum, rising inflation readings, and the absence of a policy interest rate cut kept domestic demand weak, government bond yields continued to fall, and they significantly deviated from their global counterparts.

Analysis framework

The report assesses China’s economic performance by analyzing the breakdown indicators of both manufacturing and non-manufacturing PMIs. The decline in the manufacturing PMI was primarily driven by decreases in the new orders and raw materials inventory sub-indices, while the decline in the supplier delivery efficiency sub-index reflected supply-side distortions. The improvement in the non-manufacturing PMI, on the other hand, was mainly attributable to increased demand in services and construction. The report also considered the impact of the real estate sector on consumer and construction activity, as well as external factors such as Middle Eastern lockdowns that constrained the economy.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report evaluates economic conditions by analyzing supply and demand indicators for both manufacturing and non-manufacturing PMIs. The decline in the manufacturing PMI reflects a drop in the new orders sub-index, which has fallen into contraction territory, while the decline in the supplier delivery efficiency sub-index indicates supply-side distortions. The improvement in the non-manufacturing PMI, however, was primarily driven by increased demand in services and construction.

Key data

• May Official Manufacturing PMI50.0Down from April’s 50.3, in line with market expectations
• May Non-Manufacturing PMI50.3Higher than market expectations of 49.5
• Manufacturing New Orders Sub-Index49.9Down from April’s 50.6
• Supplier Delivery Efficiency Sub-Index49.2Down from April’s 49.5
• Input Price Index60.5Down from April’s 63.7
• Output Price Index51.9Down from April’s 55.1

Impact & implications

The decline in the manufacturing PMI indicates that China’s economy faces certain downward pressure, particularly as manufacturing activity may continue to weaken over the coming months. The improvement in the non-manufacturing PMI suggests that service and construction activities have picked up, but structural issues in the real estate sector still exert pressure on household consumption and construction activity. In addition, supply constraints caused by Middle Eastern lockdowns and the drag from real estate may further suppress economic growth.

Risks

• Weak manufacturing activity could put pressure on stocks in related sectors
• Structural problems in the real estate sector may continue to affect consumer and construction activity
• Supply constraints resulting from Middle Eastern lockdowns could exacerbate inflationary pressures

What to watch

• Changes in the manufacturing PMI over the coming months
• Continued improvement in the non-manufacturing PMI
• The impact of real estate sector policy changes on the economy