China’s manufacturing activity remains sluggish in June as higher US tariffs kick in
- Purchasing managers’ index unchanged from May at 49.5, suggesting further contraction in the sector
- Non-manufacturing PMI shows continued expansion but at a slower rate
China’s manufacturing industry remained weak in June, with the official purchasing managers’ index suggesting factory owners are still downbeat about their prospects as the pressures of the trade war continue to mount.
Published by the National Bureau of Statistics on Sunday, the purchasing managers’ index (PMI) for the month, was unchanged from May at 49.4, marginally below the mean forecast of 49.5 in a poll of economists by Bloomberg.
The PMI is a gauge of sentiment among factory operators, with 50 points being the demarcation between expansion and contraction in activity. As in May, the June figure was the lowest since February’s 49.2, after signs of expansion in March and April.
Regardless, the Chinese economy is on a slowing trajectory and the impact of the existing 25 per cent tariffs on US$250 billion of Chinese goods have been damaging the manufacturing and exporting sectors for months.
Zhang Liqiun, an analyst at the Chinese Federation of Logistics Professionals, which produces the PMI in cooperation with the NBS, said the fact the June figure was again below the 50-point threshold suggested the downward pressure on the economy was “still relatively prominent”.
The NBS also released the non-manufacturing PMI on Sunday, which despite remaining in expansionary territory, slipped to 54.2 from 54.3 the previous month, in line with expectations. The gauge is a measure of activity in the services and construction sectors.
The June figures will add to the concerns of policymakers in Beijing, who would otherwise have been buoyed by the deal announced by President Xi Jinping and his US counterpart Donald Trump in Osaka.
Recent economic figures for the mainland have been almost universally poor. Industrial profits for the first five months of the year fell by 2.3 per cent, while growth of industrial output – which includes manufacturing, mining and utilities – slowed to 5 per cent year on year, from 5.4 per cent a month earlier and its lowest since February 2002, when it was just 2.7 per cent.
Exports recovered slightly in May, growing 1.1 per cent after a 2.7 per cent decline in April, but imports fell 8.5 per cent in the month, suggesting domestic demand remains sluggish.
