Industry PMI Photo:VCG

Despite the government's efforts to cool down prices of bulk commodities, seriously disrupted supply lines, resulting from the pandemic as well as the trade war in the world, has posed rising challenges to economic performances of many nations, experts said.

On Tuesday, China's Caixin manufacturing PMI, measures factory activity at medium and small-size enterprises, rose 0.1 percentage point to 52 in May, from 51.9 in April, indicating that the world's second largest economy remains on an expansive track.

China's manufacturing sector generally continued to recover steadily in May, supported by rising demand at home and abroad, Caixin said. In the Caixin China Manufacturing PMI sub-index, manufacturing demand was slightly stronger than supply in May. 

Rising demand at home and abroad supported sales growth, with the new orders index in May reaching its highest level in 2021, while the new export orders index continued to climb to its highest level since December 2020. New business starts reported the strongest growth in May.

The difference between Caixin's PMI and the official reading announced by NBS on Monday has something to do with the sampling, Li Changan, professor at the University of International Business and Economics' School of Public Administration, told the Global Times on Tuesday, noting that the official PMI is primarily reflecting performance by large and medium-sized enterprises.

However, experts noted that the price rise of bulk commodities is clearly reflected in the official PMI, indicating that the purchasing price index of major raw materials hitting new highs in recent years.

In the face of rising raw material prices, Wang Zhe, a senior economist at Caixin Insight Group, said in a statement on Tuesday that, as some enterprises began to hoard raw materials, while others faced the plight of material shortage, indicating that the supply chain has been significantly affected.

In contrast to the high sentiment on the demand side, supply is slightly weaker, with the production index falling slightly in May from the previous month, the report said.

The surveyed companies reported higher demand for inputs, but low inventory levels impacting suppliers have exacerbated supply crunch. Wang said that the rapid price rise of bulk commodities is starting to impact normal business operations.

Li Changan, a professor at the University of International Business and Economics' School of Public Administration, told the Global Times on Monday that the increase in factory prices can be beneficial to the enterprise by raising their operating revenues, but at the same time, due to fierce market competition, the price increase may lead to a decline in sales and business profits. 

"The increase in raw material prices will severely eat into business profits. That's why the authorities are working hard to support small and micro businesses," Li said.

Li said that the future trend continues to be uncertain, as the US dollar volatility continues, which is likely to lead to commodity price ups and downs.