Data released by Caixin/S&P Global showed that business activity in China's manufacturing sector unexpectedly contracted in July (for the first time since October 2023), which was caused by a drop in new orders and weak production growth.
"The most prominent issues are still insufficient effective domestic demand and weak market optimism," said Wang Zhe, an economist at Caixin Insight Group, calling for policy efforts to stabilize growth.
According to the report, the manufacturing PMI fell to 49.8 points from 51.8 points in June. Economists had expected the index to decline to 51.5 points. An index reading below 50 points indicates a contraction in activity in the sector. Thus, data from Caixin/S&P Global confirmed yesterday's official estimates, which showed that the manufacturing PMI fell to 49.4 points from 49.5 points in June.
Today's report showed that industrial production growth in July was the weakest in nine months, while new orders contracted for the first time in a year amid declining demand and shrinking customer budgets. Nevertheless, export orders continued to grow, albeit at a slower pace. Meanwhile, employment in the manufacturing sector declined slightly in June. As for the inflationary situation, selling prices fell for the first time since May amid increased competition, while input cost inflation eased to the lowest in the current four-month sequence. Meanwhile, confidence among manufacturers remained positive in July. Despite the drop in new orders, companies were confident that business development efforts and new product launches could help drive sales in the coming year.