Trade war tariffs continue to gnaw away at China’s manufacturing outlook, July data shows

Manufacturing purchasing managers’ index (PMI) rose to 49.7 in July from 49.4 in June, but remained in negative territory for the fifth month out of seven in 2019

Services and construction index also fell, to 53.7 in July from 54.2 in June, as the pressure of the trade war with the United States builds throughout China’s economy

3-MIN READ3-MIN

The official purchasing managers’ index (PMI) rose slightly to 49.7 from 49.4 in both May and June, the National Bureau of Statistics said on Wednesday. Photo: Reuters

Finbarr Berminghamin BrusselsandJohn Carter

Published: 9:12am, 31 Jul 2019Updated: 11:37pm, 31 Jul 2019

China’s manufacturing industry remained weak in July, with factory owners still downbeat about their prospects, as the pressures of the trade war with the United States continued to mount.

The official purchasing managers’ index (PMI) rose slightly to 49.7 in July from 49.4 in both May and June, the National Bureau of Statistics said on Wednesday. The July result was above the median forecast of 49.6 in a poll of economists by Bloomberg.

However, it remained in contractionary territory, the fifth month of seven this year that the official PMI has been negative.

The PMI is a gauge of sentiment among factory operators, with 50.0 being the demarcation line between expansion and contraction in manufacturing activity. The figures for both May and June were the lowest since February’s 49.2, after signs of expansion in March and April.

The survey was conducted in the first month following the trade tariff truce agreed by Chinese President Xi Jinping and his US counterpart Donald Trump at their meeting at the G20 summit in Japan at the end of June. The US had earlier threatened to impose new tariffs on US$300 billion of Chinese goods that were not yet subject to additional duties.

However, July was also the second full month in which the higher 25 per cent tariff rate was applied to US$200 billion of Chinese exports to the US. The US raised the tariff from 10 per cent on May 10, meaning there is now a 25 per cent tariff on US$250 billion on Chinese exports, tariffs that were not in effect at the time of Xi and Trump’s ceasefire deal.

The figure can, therefore, be viewed as a window into the impact of the trade war on China’s factory owners’ outlooks.