A note from ING with a take on China’s data today.
China’s official manufacturing PMI held at 50.3 in April as export orders returned to growth for the first time since 2024, but the non-manufacturing PMI fell to a 40-month low of 49.4, exposing the weakness in domestic demand.
Summary:
- China’s official manufacturing PMI edged down to 50.3 in April from 50.4 in March, coming in above both ING’s forecast and broader market expectations, with production ticking up to 51.5 and employment improving slightly though remaining in contraction at 48.8
- Overall new orders dropped to 50.6 from 51.6, pointing to weak domestic demand, while the new export orders subindex rose to 50.3, returning to expansion for the first time since April 2024
- The imports subindex also returned to expansion at 50.1 for the first time since March 2024, suggesting trade activity held up solidly through the month
- Raw material purchase prices remained elevated at 63.7 and ex-factory prices at 55.1, both slightly lower than March but still consistent with a continuing reflation trend that ING expects the May inflation data to confirm
- The private RatingDog manufacturing PMI beat expectations more decisively, rising to 52.2 from 50.8, with ING attributing the outperformance to the index’s heavier weighting toward export-oriented private firms
- China’s non-manufacturing PMI fell to 49.4 in April, matching January’s reading for a 40-month low, with the new orders subindex dropping to 44.3, its lowest level since 2022
- Non-manufacturing export orders remained in contraction for a 16th consecutive month at 47.3, while the sales price component stayed contractionary for a 31st straight month at 48.1, indicating cost pressures have not yet been passed on to consumers in the services sector
- ING attributed the underperformance in services to the sector’s greater domestic orientation relative to manufacturing, with soft consumer demand increasingly weighing on the non-manufacturing reading
China’s April purchasing managers’ index data presented a familiar but increasingly pronounced split: a manufacturing sector drawing support from a recovery in external demand, and a services sector struggling under the weight of soft domestic consumption that shows little sign of turning around.
The official manufacturing PMI edged down to 50.3 from 50.4 in March, a negligible move that nonetheless came in above both ING’s forecast and broader market consensus. Within the detail, production ticked up 0.1 percentage points to 51.5 and employment improved marginally, though it remained in contraction at 48.8. The more significant movement was in orders. Overall new orders fell to 50.6 from 51.6, a drop that ING analysts attributed to continued weakness in domestic demand. The offset came from the external side: the new export orders subindex climbed 1.2 percentage points to 50.3, returning to expansionary territory for the first time since April 2024. The imports subindex also nudged back above 50 for the first time since March 2024, a signal that trade flows held up through the month despite the elevated uncertainty surrounding the Middle East conflict and its effects on shipping costs and supply chains.
The private RatingDog PMI, compiled by S&P Global, told a more emphatic version of the same story, rising to 52.2 from 50.8, well above the 51.0 consensus. ING noted that the index’s heavier representation of export-oriented private manufacturers explained much of the outperformance relative to the official survey, reinforcing the view that external demand is the engine of China’s current recovery while domestic demand remains the drag.
On prices, raw material purchase prices held at 63.7 and ex-factory prices at 55.1, both slightly below March but still elevated, consistent with a reflation trend that ING expects to be confirmed when the May CPI data is released on May 11.
The services sector offered little comfort. The non-manufacturing PMI fell to 49.4, matching January’s reading for a 40-month low, with the new orders subindex dropping to 44.3, its weakest since 2022. Non-manufacturing export orders remained in contraction for a 16th consecutive month, and the sales price component stayed below 50 for a 31st straight month, indicating that cost pressures are not yet being passed on to end consumers. The only relief was a slight uptick in business expectations to 54.7. ING’s conclusion was direct: as China’s services sector is more domestically oriented than manufacturing, it has begun to underperform as soft consumer demand increasingly dominates the picture, and the gap between the two sides of the economy looks set to persist until meaningful demand-side support arrives.
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The split between manufacturing and services is the story here, and it matters for how markets read China’s recovery trajectory. Manufacturing is holding up, supported by external demand, with export orders back in expansion for the first time since April 2024. But the non-manufacturing PMI sliding to 49.4, a 40-month low, confirms that domestic consumers and the services sector are not participating in the rebound. That divergence limits the bullish read on the headline data and keeps pressure on Beijing to deliver demand-side stimulus rather than relying on export momentum that could easily be disrupted by further Hormuz complications or a global growth slowdown
