China’s manufacturing, services activity return to expansion in June

Official indicators of China’s factories and services activity resumed expansion in June after showing a contraction in activity for three consecutive months, as Beijing eased restrictions on COVID-19 and moved to support economic growth.

The official index of purchasing managers in the manufacturing industry rose to 50.2 in June, from 49.6 in May, the National Statistics Office said on Thursday. However, the reading was lower than the 50.5 median predicted by economists surveyed by The Wall Street Journal.

China’s official manufacturing PMI had fallen below 50 in March and remained below that level for three months in a row. A reading below level 50 suggests a contraction of activity, while one above this level indicates an expansion of activity.

The factory production sub-index rose to 52.8 in June, from 49.7 in May, the statistics office said. The subscript that measures the total of new orders rose to 50.4, compared to 48.2 in May. The export order tracking subscript rose to 49.5 in June, compared to 46.2 in May.

Despite the recovery in June, 49.3% of manufacturers surveyed by the state statistics office said they did not receive enough orders from customers and that weakening demand was the biggest problem they currently face, according to Zhao Qinghe, a senior statistician in the statistics office. He also said falling prices at the factory gate compressed companies ’profit margins and increased operating pressure.

Meanwhile, China’s official non-manufacturing PMI rose to 54.7 in June, compared with 47.8 in May, the statistics office said. The indicator had also remained in contract territory for three consecutive months from March before recovering from expansion that month.

The subscription for measuring service activity rose to 54.3 in June, compared with 47.1 in May, while the subscript for monitoring construction activity rose to 56.6, from 52.2 of May.

Zhao said sectors such as road transport, accommodation, catering, sports and entertainment, which were hit hard by the recent outbreaks of COVID-19, regained expansive territory this month.

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