Goldman Sachs analysts noted a growing divergence between the Caixin and official Purchasing Managers’ Indexes (PMIs) since May, attributing the difference to the sectors each index covers. The Caixin PMI focuses on export-oriented and consumer-related companies, whereas the official PMI includes manufacturers producing industrial materials such as steel, cement, and chemicals, which are more susceptible to a slowdown in fixed-asset investments.
This divergence reflects an economic reality marked by robust exports and consumer demand but weaker investment, according to the analysts. Wang Zhe, a senior economist at Caixin Insight Group, emphasized that “demand for consumer and intermediate goods was stronger than that for investment goods.”
Wang further commented, “Overall, the manufacturing sector kept improving in June, with supply, domestic demand, and exports continuing to grow.”
Data from May showed a 7.6% increase in exports year-over-year, surpassing analysts’ forecasts, although June statistics have yet to be released. Despite this growth, manufacturers face a less optimistic outlook due to recent tariff announcements from the US and the European Union, which have negatively impacted sentiment.
“The gauge for future output expectations fell by more than three points from the previous month, marking the lowest since November 2019,” Wang explained. “Concerns expressed by surveyed companies focused on prominent downward pressure on the economy and intense market competition.”
In response to perceived unfair support for Chinese companies, the EU announced additional tariffs of up to 38.1% on electric vehicles (EVs) imported from China. These provisional tariffs are set to take effect by July 4, with the investigation continuing until November 2, when the duties will be finalized. This decision follows the United States’ move to quadruple tariffs on Chinese EVs from 25% to 100%, aiming to bolster American jobs and manufacturing.
As the economic landscape evolves, the widening gap between the Caixin and official PMIs highlights the complexities facing China’s manufacturing sector. While exports and consumer demand remain strong, the sector must navigate challenges posed by international trade policies and fluctuating investment dynamics.