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China’s Factory Activity Contracts in July After Rebounding From Three-Month Drop in June
Zhu Yanran
DATE:  Aug 01 2022
/ SOURCE:  Yicai
China’s Factory Activity Contracts in July After Rebounding From Three-Month Drop in June China’s Factory Activity Contracts in July After Rebounding From Three-Month Drop in June

(Yicai Global) Aug. 1 -- China’s official gauge of factory activity shrank last month after having moved back into expansion territory in June, when it ended a three-month decline due to the restrictions and shutdowns brought by Covid-19.

The manufacturing purchasing managers’ index came in at 49 in July, down from 50.2 in June, the National Bureau of Statistics announced yesterday. The figure was 49.6 in May, 47.4 in April, and 49.5 in March. A reading below 50 indicates contraction.

China’s economy maintained momentum overall, but the recovery is unstable, said Wen Tao, an analyst at the China Logistics Information Center. Short-term factors led to the tightening of supply and demand, but the uptrend of the economy has not changed, according to Wen.

Zheshang Securities’ Chief Economist Li Chao said “the manufacturing PMI fell sharply in July as the mortgage boycott by homebuyers impacted the economy to a degree.” Buyers of yet-to-be-built homes in some regions refused to pay their mortgages in July, causing a sharp drop in property sales, Li added, noting that the average daily sales area plunged about 30 percent in 30 medium- and large-sized cities, impacting industrial chains across sectors.

The production sub-index stood at 49.8, down 3 points from June, as factories needed more maintenance because of hot and rainy weather, which curtailed activity. The new orders sub-index fell 1.9 point to 48.5 because due to the traditional offseason and sporadic Covid-19 outbreaks.

Companies were more pessimistic. The sub-index regarding expectations for production and operations dived 3.2 points to 52, the lowest so far this year.

Fluctuations in the economic recovery were partly due to short-term factors, Wen said. Eased cost pressures at firms, a stable employment situation, and new growth drivers continuing an upward trend are among the factors that will maintain a stable economic pickup in the second half of the year.

China’s bulk commodity prices dropped sharply last month. The purchasing price index slumped 11.6 points to 40.4, accelerating and extending a fourth-month decline.

New growth drivers continued to climb and the industrial structure continued to be optimized. The equipment manufacturing PMI and the high-tech manufacturing PMI stood at 51.2 and 51.5, respectively, both remaining above 51.

Editor: Futura Costaglione

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Keywords:   PMI,Manufacturing industry,Non-manufacturing industry,Service,Construction