Key facts
- US manufacturing activity reached its highest level in four years in May.
- The ISM manufacturing PMI in the US increased to 54.0 in May.
- The US services sector expanded at a slower pace in May, with the ISM Services PMI falling to 54.5.
- China's local governments issued nearly 1.5 trillion yuan in special bonds for construction in the first five months of the year.
- BYD's global vehicle sales rose 0.3% in May, ending an eight-month decline.
- Li Auto's vehicle deliveries fell 18% year-over-year in May.
- Japan's services activity remained flat at 50.0 in May, the weakest pace since early 2025.
- Japan's foreign exchange intervention in May likely boosted US Treasury yields.
- Asian currencies consolidated against the dollar in May.
- Kuwait's business activity declined at a slower pace in May.
Global economic activity in May presented a mixed picture across major economies. In the United States, manufacturing activity surged to a four-year high, with the ISM manufacturing PMI climbing to 54.0 from 52.7 in April. This increase was attributed to businesses accelerating orders in anticipation of rising prices and ongoing shortages. However, the US services sector experienced a slowdown, with the ISM Services PMI dropping to 54.5 in May from 59.2 in April, marking 23 consecutive months of growth but with declines in new orders and business activity.
China's economic landscape showed signs of improvement alongside persistent weaknesses. Local governments issued approximately 1.5 trillion yuan ($222 billion) in special bonds for construction projects during the first five months of the year. China's Q2 industrial activity improved, though the Federal Reserve noted that the current export-led expansion is characterized by its scale, advanced goods production, and an asymmetric trade pattern of export growth without corresponding import growth. Chinese automakers are expanding their presence in Europe, utilizing competitive pricing and advanced technology, which challenges established brands. In the automotive sector, BYD reported a 0.3% year-on-year increase in global vehicle sales for May, reaching 383,453 units and ending an eight-month downturn, with international sales surging 80.4% while domestic sales decreased by 24%. In contrast, Li Auto reported an 18% year-over-year decline in May deliveries, with reasons for the drop not yet disclosed. China's A-share indices experienced volatility, with the ChiNext index reversing an earlier gain.
Japan's economic data indicated a slowdown in its services sector, with activity remaining flat at 50.0 in May, the weakest growth pace observed since early 2025. This stagnation reflects a broader trend of decelerating economic momentum. Furthermore, Japan's foreign exchange intervention in May to support the Yen involved selling US Treasury securities, an action that likely contributed to a rise in US Treasury yields during that month. Meanwhile, Asian currencies traded sideways against the dollar as market participants assessed the implications of ongoing Middle East developments, reflecting a cautious trading stance. Kuwait's business activity also declined at a slower pace in May, suggesting potential stabilization.