China's official manufacturing PMI fell to the breakeven line in May, while non-manufacturing PMI rebounded into expansion territory

Overview

This report comments on China's official NBS PMI data for May 2026. Manufacturing PMI fell from 50.3 in April to 50.0, indicating weaker manufacturing expansion momentum; non-manufacturing PMI rose from 49.4 to 50.1, mainly driven by improvement in services and a rebound from low levels in construction. The report's overall judgment is that manufacturing growth was weak, services activity increased, and construction remained in decline.

Core views

The core view is that the May PMI mix showed structural divergence: the headline manufacturing index fell back to the breakeven line, while new orders, export orders, imports, and PMI for small and medium-sized enterprises all weakened; the headline non-manufacturing index rebounded into expansion territory, with a more notable improvement in services; although construction rose from 48.0 to 48.8, it remained below 50 and below its historical average. On prices, although input costs and output price indices declined from April, they remained at relatively high levels, reflecting persistent cost-push inflation pressure related to the Middle East conflict.

Analysis framework

The report uses month-on-month comparisons of the official NBS PMI headline indices and major sub-indices, and compares actual readings with Goldman Sachs forecasts and Bloomberg consensus expectations; it also breaks down the sources of change in manufacturing and non-manufacturing by industry, company size, trade-related sub-indices, and price sub-indices.

Methodology notes

• Macro high-frequency indicatorsPMI diffusion index analysis

  Using 50 as the dividing line between expansion and contraction

  A PMI above 50 generally indicates expanding activity, while below 50 indicates contracting activity; based on this, the report judges manufacturing to be near the breakeven line, services to have returned to expansion territory, and construction to still be in contraction territory.

• Expectation gap analysisComparison of actual data with forecasts and consensus expectations

  Deviation of data relative to market expectations

  The report compares the May manufacturing PMI and non-manufacturing PMI with Goldman Sachs forecasts and Bloomberg consensus expectations to assess whether the data constituted a macro surprise.

• Goldman Sachs internal indicatorAsia-MAP

  Growth relevance and the degree of surprise relative to consensus expectations

  The report gives the official manufacturing PMI an Asia-MAP score of 0 (3, 0), where growth relevance is 3/5 and the degree of surprise relative to consensus expectations is 0, indicating that the data has moderate relevance for growth but did not materially deviate from consensus expectations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China macroeconomy

  PMI data shows divergence in the growth structure

  Strengths

  Services activity rebounded, non-manufacturing PMI returned to expansion territory, and large enterprise PMI improved.

  Weaknesses

  Manufacturing PMI fell back to 50.0, while new orders, export orders, imports, and SME PMIs weakened; construction remained below 50.

  Comparison

  Manufacturing data matched consensus expectations but was slightly below Goldman Sachs' forecast; non-manufacturing data was clearly above both Goldman Sachs' forecast and consensus expectations.

  Risks

  Falling external demand, weak construction, cost-push inflation, and disruptions from extreme weather may weigh on the quality of short-term growth.

• Manufacturing

  Marginal slowdown in activity

  Strengths

  The output index remained above 50, and new orders and output sub-indices in some high-end manufacturing industries were above 53.

  Weaknesses

  The headline index fell to 50.0, new orders dropped to 49.9, and both new export orders and imports fell below 50.

  Comparison

  Large enterprise PMI rose to 51.1, while medium-sized and small enterprise PMIs fell to 48.6 and 48.5, respectively.

  Risks

  Weakening demand and cost pressures coexist, which may affect corporate profitability and willingness to expand production.

• Services

  Activity improved

  Strengths

  Services PMI rose to 50.3, with strength in industries such as railway transportation, telecommunications, broadcasting, television and satellite transmission services, and insurance services.

  Weaknesses

  PMIs in air transportation and real estate services were below 50.

  Comparison

  Improvement in services pushed non-manufacturing PMI up from 49.4 to 50.1.

  Risks

  If real estate-related services remain weak, the breadth of the services recovery may be limited.

• Construction

  Low-level contraction

  Strengths

  Construction PMI rebounded from 48.0 to 48.8.

  Weaknesses

  The index remained below 50 and relatively low versus its historical average.

  Comparison

  Construction was weaker than services and was the main drag within non-manufacturing.

  Risks

  Extreme weather such as heavy rainfall in the south and central regions and heatwaves in the north may continue to disrupt outdoor construction activity.

Key data

• May NBS manufacturing PMI50.0April was 50.3; Goldman Sachs forecast 50.1; Bloomberg consensus expectation 50.0.
• May official non-manufacturing PMI50.1April was 49.4; Goldman Sachs forecast 49.7; Bloomberg consensus expectation 49.5.
• Manufacturing new orders index49.9April was 50.6, making it one of the major sub-indices with the largest decline.
• Manufacturing output index51.2April was 51.5, still in expansion territory but lower.
• Manufacturing new export orders index48.6April was 50.3, showing a clear weakening in trade-related demand.
• Manufacturing imports index48.8April was 50.1, falling into contraction territory.
• Large enterprise PMI51.1April was 50.2, showing relatively stronger performance by large enterprises.
• Medium-sized enterprise PMI48.6April was 50.5, moving into contraction territory.
• Small enterprise PMI48.5April was 50.1, moving into contraction territory.
• Services PMI50.3April was 49.6; industries such as railway transportation, telecommunications, broadcasting, television and satellite transmission services, and insurance services had PMIs above 55.
• Construction PMI48.8April was 48.0; despite the rebound, it remained at a low level.
• Input cost index60.5April was 63.7; although it declined, it remained elevated.
• Output price index51.9April was 55.1, still in expansion territory.

Impact & implications

The implications of this data mix for China's short-term growth are somewhat cautious: weakening manufacturing new orders, external demand, and SME activity reduce industrial expansion momentum; the rebound in services provides some cushion; and construction remaining below 50 indicates that pressure in real estate and the construction chain has not yet faded. Elevated price indices mean cost pressures may continue to affect corporate profits and inflation assessments.

Risks

• Weakening manufacturing new orders and external demand sub-indices may signal insufficient momentum in subsequent industrial production.
• PMIs for medium-sized and small enterprises moved into contraction territory, indicating widening divergence in activity across company sizes.
• Construction PMI remained below 50, suggesting continued downward pressure on real estate and construction-related activity.
• Input cost and output price indices remained elevated, and cost-push inflation may squeeze corporate profits.
• Extreme weather may continue to disrupt construction and other outdoor economic activity.

What to watch

• Whether subsequent NBS manufacturing PMI can stabilize back above 50.
• Whether new orders, new export orders, and imports sub-indices recover.
• Whether the divergence between SME PMIs and large enterprise PMI widens.
• Whether the improvement in services PMI spreads from railway transportation, telecommunications, and insurance to more industries.
• Whether construction PMI remains below 50 and whether real estate services improve.
• Whether input cost and output price indices continue to stay elevated.