(Yicai) Aug. 1 -- Activity in China’s manufacturing sector slowed in July, dipping into negative territory for the first time since April, as factory output falters amid a sharp drop in overseas orders, according to a widely watched private survey.

The Caixin manufacturing purchasing managers’ index came in at 49.2 in July, a decrease of 1.3 point from June, data released by financial media group Caixin showed today. It had stayed above the benchmark of 50, indicating expansion, in May and June. A reading below 50 shows contraction.

The data differs from the official manufacturing PMI, published yesterday by the National Bureau of Statistics, which logged a 0.3 point rise to 49.3. It is the fourth month running that the figure has stayed in negative territory.

Sluggish overseas demand was the primary factor behind the decline. The new export orders subindex plunged in July to its lowest level since October 2022 due to an increased risk of overseas recession and a big drop in export orders.

The manufacturing boom came to an end in July and the economy is under significant pressure, said Wang Zhe, a senior economist at Caixin Think Tank.

After two months of growth, weak market conditions led to a drop in customer demand and a decline in new orders, the report said, citing companies surveyed. As a result, factory output experienced a slight contraction.

The government’s top priorities remain those of supporting employment, stabilizing expectations and increasing incomes. But monetary policy has had limited impact on the supply side, so fiscal policies need to be more active in stimulating demand, Wang said.

Factory employment slumped for the fifth straight month in July, largely due to tepid demand. Many companies are looking to cut back on costs and increase efficiency. Power shortages over the hot summer months also affected some firms’ ability to meet orders.

In July, the purchase price subindex remained below the boom-bust line for the fourth consecutive month and the factory price subindex stayed below 50 for the fifth straight month. Although deflationary pressures continue to rise, the decline has narrowed.

Businesses, though, remain optimistic. Last month, the factory production and operation expectations index rose back into expansion territory, but remains below the long-term average. The outlook for the domestic and global economies is a big concern for many of the companies polled.

Editor: Kim Taylor