China’s Factory Activity Continues Contraction for Second Month in June
Factory activity in China contracted for the second consecutive month in June, intensifying the challenges for the world’s second-largest economy ahead of next month’s crucial third plenum. The official manufacturing purchasing managers’ index (PMI) remained at 49.5 in June, unchanged from May, according to data from the National Bureau of Statistics (NBS) released on Sunday.
The new manufacturing export order subindex also stayed unchanged at 48.3 in June.
A PMI reading above 50 indicates expansion, while a reading below suggests contraction.
Subindexes for new orders, raw material inventory, and employment all stayed below 50, and the suppliers’ delivery times subindex fell to 49.5 from 50.1 in May.
The production subindex remained above 50 but dropped to 50.6 from 50.8, indicating slower manufacturing growth.
“Overall, China’s economy remains in expansion, but the foundation for sustained and improved recovery still needs consolidation,” said senior NBS statistician Zhao Qinghe.
The new orders subindex fell slightly to 49.5 from 49.6 in May. Zhao attributed the drop to “continued insufficient demand in the manufacturing market,” noting it as the main challenge for enterprises.
Meanwhile, the non-manufacturing PMI, which measures sentiment in the service and construction sectors, fell to 50.5 in June from 51.1 in May, marking the sixth straight month in expansion territory.
Within the non-manufacturing PMI, the construction sector business activity index dropped to 52.3 from 54.4 in May.
“The expansion of the construction sector has slowed due to persistent heavy rainfall in many southern regions affecting construction activities,” Zhao said.
This data comes two weeks before the highly anticipated third plenum, set for July 15-18. Top Communist Party officials will gather in Beijing for this session, traditionally setting the major economic direction for the next five to ten years.
Despite exceeding expectations with 5.3% year-on-year growth in the first quarter, China’s economic recovery remains unstable, facing hurdles like a downturn in the property sector, mounting local government debt, and declining foreign investment.
The third plenum is expected to endorse a wide-ranging communique, deepen reforms, and implement substantial measures to signal markets and restore investor confidence in building a “high-level socialist market economy” by 2035.
