China’s Manufacturing Grows at Slowest Pace in 15 Months, Caixin PMI Shows

China’s manufacturing sector expanded at its slowest pace in 15 months in July as output growth softened and new orders dipped, a Caixin-sponsored survey showed.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gives an independent snapshot of the country’s manufacturing sector, slipped to 50.3 from 51.3 the previous month, according to a report released Monday. A number above 50 signals an expansion in activity, while a reading below that indicates a contraction.

“Manufacturers in China signalled a softer improvement in operating conditions at the start of the third quarter,” the report said, though the latest increase still marked the 15th straight month of expansion for the manufacturing sector.

The July reading was notably pulled down by a renewed decline in total new orders, the first fall in the gauge for 14 months. Meanwhile, higher factory-gate prices dented consumer demand and the Covid-19 pandemic continued to drag on export sales, which edged up only slightly in July, according to the survey.

Output growth shrunk for the third month in a row to the lowest rate in 16 months, with the marginal increase due largely to firmer market conditions, the survey showed.

That said, manufacturers faced weaker inflationary pressure, with input costs rising at the weakest rate since November, even though the costs of raw materials remained high and transport fees gained due to the resurgence of Covid-19 cases across China. By comparison, growth in output charges fell steeply.

Hiring was largely unchanged in July from the previous month, indicating a relatively stable employment market. “Some enterprises hired more staff to expand production capacity, while some kept a cautious stance on increasing hiring,” Wang Zhe, a senior economist at Caixin Insight Group, said in the report.

Chinese manufacturers had generally expected an increase in output over the next year, the report said. However, they became less confident in July than in the previous few months amid uncertainty over the global pandemic, which continued to disrupt international supply chains.

“China’s official second-quarter economic figures were in line with expectations, but the Caixin China manufacturing PMI in July and relevant data suggested the recovery of the economy is not yet solid,” said Wang. “The economy is still facing huge downward pressure, and we need to ensure entrepreneurs’ confidence.”

Contact editor Lin Jinbing (jinbinglin@caixin.com)

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