China’s factory activity returned to contraction in Jul after two-month expansion – private survey

 

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China’s Caixin Manufacturing PMI for July comes in at 49.2, slipping into contraction after expanding for two straight months, compared to a reading of 50.3 expected by analysts and the 50.5 in the previous month.

The momentum in the manufacturing sector weakened in July, with production and demand both contracting and in particular, sluggish overseas demand dragged on the overall demand, showed the survey.

That came in contrast to China’s official manufacturing PMI which picked up slightly to 49.3 in July, though remaining in the contractionary territory for the 4th consecutive month.

In the Caixin manufacturing PMI, the sub-index for new orders hit a new low since January this year and returned to contractions after a two-month expansion, while the sub-index for production hit the lowest level since February. 

Notably, the sub-index for new export orders hit the lowest since October 2022 as overseas demand remained sluggish amid increasing recession risks.

Employment contracted for the fifth consecutive month in July, though at a slow pace. The shrinking employment in the manufacturing industry came as companies reduce cost amid sluggish market demand, said the survey companies.

Raw material inventory increased slightly in July, but the growth slowed from the previous month. The sub-index for product inventory rose above the 50 mark for the first time since October 2022, but the survey noted that the rising inventory came as companies’ production grew faster than sales, instead of a result of companies’ voluntary restocking.

The sub-indexes for material purchasing rices and product factory-gate price remained in contraction for the fourth and fifth consecutive month, respectively, indicating that deflationary pressure continue to increase.