中国宏观：5月PMI：价格上涨影响需求

May PMl: rising prices affecting demand Chief Economist+852-2203-6139 indicators softening.Detailedbreakdown of indicators suggests theoil-shockdrivenprice spikesarenowbeginningto impose costson downstream demand.Servicessector is providing a partial offset for the Chinese economy, but the renewed dragfromconstructionactivitymayhavepersisted. Economist+852-2203-6166 returnedto exactly50-the linebetween expansion and contraction-inMay,down 0.3pp from April. We believe this primarily reflects the adverse impactof rising prices on end-demand. Three observations support this reading. First, orders are weaker than production.The production sub-index held at 51.2,down only 0.3pp and still firmly in expansion -manufacturers continued to produce.But the new orders sub-index fell by 0.7ppt to 49.9, slipping below 50 for the firsttime in five months, and new export orders dropped a sharp 1.7pp to 48.6.Production is running ahead of demand, and the gap is widening. Second,inputpricescontinuetorisemuchfasterthanoutputprices.Theinputprice sub-index stood at 60.5, the output price sub-index at 51.9. Both remain inexpansionforafifth consecutivemonth,butthegapbetween themhas notnarrowedfirms are absorbing cost increases they cannot fully pass through.This iscompressing margins and, in our view,may have begun to curb procurementandproduction decisions. Third, upstream inventories are falling while finished goods inventories arerising.Raw material inventory sub-index edged down 0.7pp to 48.6, while finished-goods inventory sub-index rose by 1.8ppt to 49.3. This is the footprint of price-induced caution:manufacturers arescalingbackupstreampurchases inthefaceofelevated input costs, while softer downstream sales leave finishedgoods piling up.Itisnotyetaclassicinventoryoverhang,butthedirectionoftravelwarrantscaution. The good news is services PMI rebounded 0.7pp to 50.1,returning toexpansionterritory.Informationtechnology,financial services,and transportationall remained in high-activity territory above 55. Construction, however, remainedbelow 50 at 48.8, suggesting that the investment weakening we observed since Aprilmay have extended into May. Selected high-frequency charts: Industrial product prices have continued to increase. Most notablysteel, one of the most widely-used materials in manufacturing, has startedto see its price rise since late April, after a six-month decline. Zinc pricesThe impact of rising oil prices is now spreading across a broader range ofindustries. Governmentborrowing pace hasyetto catch upwith lastyear'space.Despite a slight acceleration in of bond issuance in MayRMB 1.1tr ofCGBs and SLGBs were issued,an increasecompared to 0.93tr in Marchand 0.95tr in April-the total accumulated issuance for the first fivemonthsof theyearremains RMB 0.5tr less than the sameperiod last year. Selected high-frequency data of the month Source: Deutsche Bank Research. Wind ChinaMacro Figure7:Construction, remained below50at 48.8 Source: Deutsche Bank Research, Haver Analytics Source: Deutsche Bank Research, Haver Analytics ChinaMacro China Macro Appendix 1 The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendationor view in this report. Deyun Ou, Yi Xiong, Ph.D..ImportantDisclosures Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local companies,and other sources.For further information regarding disclosures relevantto Deutsche Bank Research,https://research.db.com/Research/Disclosures/FiCCDisclosures.Aside from within this report, important risk and conflictencouraged to reviewthis information before investing. China Macro The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively 'Deutsche Bank').Though the information herein is believed to be reliable and has been obtained from public sourcesbelieved tobe reliable,Deutsche Bank makes no representationasto its accuracyorcompleteness.Hyperlinks tothird-party websites in this report are provided forreader convenience only.Deutsche Bank neither endorses the content noris responsiblefor theaccuracy or security controls of thosewebsites.If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, DeutscheBankmayact as principal for its ownaccount oras agentforanotherperson.Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own accountorwithcustomers,inamannerinconsistentwiththeviewstakeninthisresearchreport.OtherswithinDeutscheBank,includingstrategists,salesstaffandotheranalysts,maytakeviewsthatareinconsistentwiththose