China’s Manufacturing Holds Firm as Recovery Stabilizes

(Bloomberg) — A gauge of China’s manufacturing industry was little changed in June, suggesting the economy’s recovery is stabilizing at a solid pace.

The official manufacturing purchasing managers’ index slipped to 50.9 in June, the National Bureau of Statistics said Wednesday. That compares with 51 in the previous month and 50.8 projected by economists.

The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 53.5, lower than the 55.3 predicted by economists. Readings above 50 indicate an expansion in output.

The latest data adds to signs that China’s economic recovery is steadying after rapid expansion from the pandemic, with growth becoming more balanced among sectors. Top policy makers this week provided a positive assessment of the economy, saying it’s showing more stability and strength even though global and domestic risks remain.

Manufacturers continued to face constraints from supply chain bottlenecks and raw material price hikes in June. A Covid-19 outbreak in the Guangdong province caused a month of disruptions at Yantian, one of the world’s busiest container ports, and only restored normal operations last week. Price pressures remained elevated in the month, although there are signs they are beginning to cool.

The recovery in the services industry was likely affected by virus outbreaks in some parts of China and tightened movement control measures ahead of the Communist Party’s 100th anniversary celebrations.

Factory output continued to expand but at a slower pace, and job sentiments have improved, the NBS said in its statement. The services sector was affected by the “impact of regional pandemic outbreaks,” it said, adding that air transport, hotels and catering had contracted in the month.

The construction sector remained robust in June, with the pressure of rising construction costs easing somewhat, according to the NBS.

A sub-index of new export orders for factories remained below 50 for a second month, a sign of contraction. New orders continued to grow, with the sub-index rising to 51.5. The manufacturing employment index rose slightly to 49.2 in June, while non-manufacturing employment worsened to 48.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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