Is a drop in China manufacturing index concerning?

In May, the purchasing managers’ index (PMI) of China’s manufacturing industry was 50. 0%, a decrease of 0. 3 percentage points from the previous month. An index above 50% is usually considered expansion, while anything below that is viewed as contraction. According to data from the National Bureau of Statistics, the index for the largest enterprises was 51.

1%, an increase of 0. 9 percentage points from the previous month, which was above the threshold, while the PMI for medium- and small-sized enterprises were 48. 6% and 48. 5%, respectively, a decrease of 1. 9 and 1. 6 percentage points from the previous month, or below the threshold.

While the data could be a worrying sign of things to come, analysts note that China grew exports 6. 1% in 2025 while the PMI declined in 11 of 12 months of the year. Chart showing narrow decline of composite PMI since the outbreak of the Iran war.

(Chart: China National Bureau of Statistics) Inflationary effects on manufacturers have been seen as the conflict in the Strait of Hormuz pushed up the cost of raw materials. The monthly Purchase Price Index was at 54. 8 prior to the outbreak of the Iran war in February, increased to 63. 9 and 63. 7 in March and April, and settled at 60. 5 in May.

Among the five sub-indices that make up the manufacturing PMI, the production index was above the threshold, while the new order index, the raw materials inventory index, the employment index and the supplier delivery time index were all below the threshold. The production index was 51. 2%, a decrease of 0.

3 percentage points from the previous month and still above the threshold, indicating a continued expansion in production activities in the manufacturing industry. The new order index was 49. 9%, a decrease of 0. 7 percentage points from the previous month, indicating a decline in the market demand climate of the manufacturing industry.

The raw materials inventory index was 48. 6%, a decrease of 0. 7 percentage points from the previous month, indicating a decline in the inventories of main raw materials in the manufacturing industry. The employment index was 48. 6%, a decrease of 0.

2 percentage points from the previous month, indicating a decline in the employment climate of the manufacturing industry. The supplier delivery time index was 49. 2%, a decrease of 0.

3 percentage points from the previous month, indicating that the delivery time of raw material suppliers in the manufacturing industry continued to extend compared to the previous month. Read more articles by Stuart Chirls here.