Slowdown in production and contraction in new orders dragged manufacturing PMI lower
China's July official manufacturing purchasing managers’ index PMI slowed to 49.3, down from 49.7, to reach a three-month low. The data came in weaker than market expectations.
The key subindices were down on the month. Production fell to 50.5 from 51.0, though it remained a relative outperformer and was still in expansion territory. With industrial production data beating forecasts in previous months, the expansion bodes well for continued resilience in July.
However, it’s possible that this strength could begin to fade in the months ahead. New orders didn’t fare quite as well, falling to 49.4 from 50.2. This is the third month in the last four that new orders have contracted. New export orders also snapped a two-month upswing, dropping to 47.1 from 47.7.
There were a few minor silver linings in the report as well, with employment (48.0) and ex-factory prices (48.3) both up on the month. Still, both remained in contraction territory.
Non-manufacturing PMI barely remained in expansion territory
We also saw a slowdown of the non-manufacturing PMI, down to 50.1 from 50.5, and hitting an eight-month low. The non-manufacturing PMI has remained at neutral or expansionary territory since the start of 2023, but it’s come close to falling into contraction a few times.
New orders (45.7) and export orders (48.8) both slowed in the month and have remained in contraction territory throughout the year to date. This slowdown overshadowed small upticks in employment (45.6) and business sentiment (55.8).
Moving forward, continued efforts to build out the services consumption sector, along with recent measures to support childcare and elderly care, should continue to offer some support for the services sector.
