Manufacturing activity in China slows in June

China's manufacturing activity growth slowed in June. The Caixin China General Manufaturing PMI was down to 50.5 in June from 50.9 in May, indicating only a marginal output expansion for the Chinese manufacturing sector.

While new order growth remained mild overall, manufacturers registered a further improvement in supplier performance and input costs declined solidly, the private survey also showed.

Prices continued to plunge for both input and output prices. In particular, input prices fell at the quickest rate since January 2016. However, manufacturers’ bargaining power remained weak in terms of the prices they could charge customers due to limited demand.

At the same time, business optimism for the coming 12 months waned to an eight-month low in June, as some manufacturers expressed concerns over relatively sluggish market conditions.

The survey data suggested that the new business upturn was mainly driven by improved domestic demand. New export business was broadly unchanged due to weak global economy.

Caixin China General Manufacturing PMI. (sa, >50 = improvement since previous month) (Sources: Caixin, S&P Global PMI)

Stable footing has yet to be found

Commenting on the survey result, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said: “In a nutshell, manufacturing activity growth suffered a marginal slowdown. Both supply and demand picked up slightly, the job market got worse, logistics improved, businesses stepped up purchasing, raw material inventories grew marginally, prices continued to slump, and manufacturers’ optimism wavered.”

“A slew of recent economic data suggests that China’s recovery has yet to find a stable footing, as prominent issues including a lack of internal growth drivers, weak demand and dimming prospects remain,” concluded Dr. Wang Zhe.

The senior economist proposed that stronger policy support is needed on the macro level, along with higher implementation efficiency from a micro perspective, to ensure that policies benefit market players directly.

The official PMI for China's manufacturing sector released by the National Bureau of Statistics remained in the contraction zone after ticking up to 49 in June from 48.8 in May.