China's RatingDog Manufacturing Purchasing Managers' Index (PMI) declined to 51.8 in May from 52.2 in April, according to data published by RatingDog on Monday. Despite the slowdown, the PMI reading was higher than the market forecast of 51.4, indicating that manufacturing conditions continued to improve, albeit at a slower pace [1][2]. The seasonally-adjusted RatingDog China General Manufacturing PMI also came in at 51.8, slightly above the 51.6 expected in a Reuters poll, reinforcing the notion that factory activity beat forecasts even as growth moderated compared to the previous month [2]. The 50 mark separates expansion from contraction, so the latest figure still signals expansion in the sector [2].
In contrast, China's official manufacturing PMI for May fell to 50 from 50.3 in April, matching expectations and marking the lowest level since a 49 print in February. This suggests subdued manufacturing sector growth, increased services activity, and a continued decline in the construction industry, according to Goldman Sachs analysts [2].
Market reaction was modest, with the AUD/USD pair trading around 0.7183, up 0.01% on the day following the PMI release [1]. The health of the Chinese economy is a significant driver for the Australian Dollar, given China is Australia's largest trading partner. Positive surprises in Chinese growth data often directly impact the AUD and its pairs [1].
Official figures also showed that while China's retail sales growth hit a 40-month low in April, domestic tourism and spending picked up during the extended May 1 holiday. Chinese hotel group H World reported that the 10 most popular destinations by occupancy rate were in smaller cities, where rates tend to be lower than in major cities [2].
CONCLUSION
China's manufacturing PMI for May came in above market expectations, signaling continued expansion despite a slower pace of growth. The modest uptick in AUD/USD reflects the importance of Chinese economic data for Australian markets. While manufacturing growth is subdued, increased services activity and domestic tourism offer some positive signs for China's broader economy.