(Yicai Global) June 30 -- Activity in China's manufacturing and service sectors began expanding again this month, snapping a three-month decline, after restrictions and shutdowns in cities such as Shanghai brought Covid-19 back under control.

The manufacturing purchasing managers' index rose to 50.2 in June, from 49.6 in May, the National Bureau of Statistics announced today. The non-manufacturing PMI jumped to 54.7, up from 47.8 the month before. A mark of 50 separates growth from contraction.

The return to expansion indicates economic recovery, said Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, adding that the economy will get back its growth momentum as Covid-19 wanes.

But there is more work to be done. China's economic recovery still needs a more solid foundation and stronger demand, as well as stable raw material prices to promote an industrial rebound, said Wen Tao, an analyst at the China Logistics Information Center. 

Some indicators remain soft. Although demand had recovered, about half of companies are still reporting insufficient demand, Zhang said. Supply and prices are stabilizing, but more than 58 percent of firms say raw material costs are high, he added.

Weak orders are a big problem. More than 49 percent of manufacturers said new orders were sluggish, according to Zhao Qinghe, senior statistician at the NBS. The ex-factory price index slid to 46.3 in June, marking a second straight month of contraction. Some corporate profits were squeezed to a certain extent and business operations were under pressure, Zhao said.

But companies remain optimistic. The sub-index regarding expectations for production and operations climbed 1.3 point to 55.2 in June, the highest level in the past three months, as business confidence improved.

Editor: Emmi Laine, Xiao Yi