China’s factory activities grew at slower pace in June, economic recovery weaker than expected – private survey

 

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China’s Caixin Manufacturing PMI reached 50.5 in June, remaining in expansionary territory for the second consecutive month, beating market expectation of 50 and lower than 50.9 in the previous month.

In breakdown, the sub-indices for production and new orders remained in the expansionary territory, but both growing at a slower pace.

The gauge for employment picked up slightly from the reading in May, which was the lowest level since March 2020, but remained deep in contraction. 

The sub-index for raw material inventory expanded at a faster pace, while that for raw material purchasing prices slipped deeper into contraction and hit the lowest level since Feb 2016. 

The gauge for inventory of finished products remained in contraction, shrinking at a faster pace; the sub-index for factory-gate prices improved in contractionary territory, while the sub-indices for suppliers’ delivery time and business expectation both weakened in the expansionary territory.

The foundation of China’s current economic recovery is not solid and the speed of repair is slower than expected, and the lack of sufficient endogenous driving force, weak demand and poor market expectations are still prominent problems, said Wang Zhe, senior economist at Caixin. 

In particular, employment is weakening, deflationary pressure is increasing and optimistic expectation is fading, he said.

Looking ahead, the government should step up supportive macro policies and improve efficiency at the implementation level to ensure that policy dividends will reach market players directly and effectively improve employment and market expectations, he said.