china's pmi stumbles: tariffs bite, manufacturing slows

2025-05-02 general

beijing, Friday, 2 May 2025.
China’s manufacturing sector is showing signs of strain. The latest Purchasing Managers’ Index (PMI) has dipped to a 16-month low of 49. The contraction follows the introduction of new tariffs on Chinese imports. The tariffs of up to 145 percent on goods entering the U.S. have particularly hurt export orders. This decline raises concerns about job market health, as Beijing policymakers scramble to cushion the impact. Some analysts suggest that US importers are in ‘wait-and-see mode’ which could lead to further disruption once inventories are depleted.

Deeper dive into pmi components

The contraction is broad-based. The output index decreased to 49.8 in April [2]. New orders also fell to 49.2 [2]. Foreign orders experienced the most significant decline in eleven months, reaching 44.7 [2]. The employment index showed a faster contraction, registering at 47.9 [1]. Buying activity declined for the first time in three months, dropping to 46.3 [2]. Delivery times lengthened, while input costs and selling prices both declined sharply [2]. This data paints a concerning picture for investors, as weakening demand and rising costs could squeeze corporate margins.

Business confidence shaken

Business confidence has taken a hit. Business confidence in China decreased to 49 in April [2]. This is a decrease from 50.5 in March 2025 [2]. This decline reflects a seven-month low [2]. The National Bureau of Statistics of China PMI also fell to 49 [2]. This is down from March’s 12-month high of 50.5 [2]. Weaker confidence may translate to reduced investment and slower economic activity. This could further depress stock valuations.

Sectoral outlook mixed

Not all sectors are suffering equally. High-technology manufacturing PMI stood at 51.5 in April [3]. This is significantly higher than the overall manufacturing level [3]. The production and new orders indexes for this sector are both above 52 [3]. Sectors like food, beverage, automotive, and aerospace show strong expectations [3]. Investors should consider rebalancing portfolios towards resilient sectors. These sectors are less exposed to trade tensions.

expert opinions and market forecasts

ING described China as “holding up well in early stages of the tariff test of endurance” [1]. However, the sustainability of this resilience is questionable [alert! ‘sustainability is uncertain’]. Trading Economics projects China’s Manufacturing PMI to trend around 52 in 2026 and 51.3 in 2027 [2]. These projections indicate a potential for recovery. However, they also highlight the need for careful monitoring of trade dynamics. Darrell Cronk, Chief Investment Officer at Wells Fargo, lowered the S&P 500 index target to 6000 points [5]. Cronk believes that US economic growth will stagnate in the first two quarters [5].

Bronnen

trade tariffs manufacturing pmi