ExplainerChina’s manufacturing, services data in July: 4 takeaways as pressure intensified, activity cooled

Official manufacturing purchasing managers’ index remained in contraction for a fourth straight month, while Caixin/S&P Global gauge suffered first decline since April

Official non-manufacturing PMI also fell in July, but in contrast, the Caixin/S&P Global gauge expanded for a seventh straight month

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The construction subindex within the official non-manufacturing purchasing managers’ index (PMI) fell to the second-lowest reading on record at 51.2 in July. Photo: AP

Published: 11:00pm, 3 Aug 2023Updated: 9:29am, 4 Aug 2023

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1. Factory activity average falls to four-month low

China’s official manufacturing purchasing managers’ index (PMI) rose to 49.3 in July, up from 49 in June, but remained in contraction for a fourth straight month. The 50-mark separates growth from contraction on a monthly basis.

Within the official manufacturing PMI, the new-orders subindex rose to 49.5 in July from 48.6 in June, while the new-export-orders subindex fell to 46.3 from 47.2.

“July’s marginal improvement in the official manufacturing PMI was concentrated in production and raw material inventory,” said analysts at Nomura.

“Overall, three of the five subindices that directly feed into the headline manufacturing PMI calculation edged up in July – except for production and employment – with only two staying in expansionary territory.”

In line with the official gauge, the Caixin/S&P Global manufacturing PMI fell to 49.2 in July from 50.5 in June, missing analysts’ forecasts of 50.3 and marking the first decline in activity since April.

The average of the two gauges fell to a four-month low and is, according to analysts at Capital Economics, consistent with a further deterioration in factory activity last month.

Both the new-orders and export-orders components fell to their lowest since reopening. The latter points to a further drop in exports

Capital Economics

“We think it makes sense to average across both PMIs to gauge conditions in industry and get a sense of what they mean for the hard data,” said Capital Economics’ China economists Julian Evans-Pritchard and Sheana Yue.