China private factory gauge unexpectedly shrinks after US truce

China’s manufacturing activity unexpectedly contracted in May, according to a private survey, as improved trade flows proved insufficient to shore up an economy still under pressure from weak domestic demand.

The Caixin manufacturing purchasing managers index fell to 48.3 from 50.4 in April, according to a statement released by Caixin and S&P Global on Tuesday, well below the 50 mark separating expansion from contraction. The figure was the lowest since September 2022 and a surprise compared with the median forecast of 50.7 by economists.

The results were weaker than the official PMI reading released Saturday, which showed manufacturing contracted at a slower rate after the reprieve on tariffs unclogged trade flows.

The picture painted by the more export-oriented Caixin survey offers another glimpse of how factories adjusted in the initial aftermath of the trade ceasefire. China and the US agreed to reduce tariffs for 90 days beginning May 14.

The strength of manufacturing in the months ahead is still in question given an uncertain export outlook, with tensions rising again in recent days between the world’s two biggest economies.

The Caixin results have tended to be higher than those from the official poll over the previous year as exports stayed strong. The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and medium-sized firms in the non-state sector.