China: Manufacturing PMI edges down in June
The manufacturing purchasing managers’ index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell to 51.5% in June from 51.9% in May. The result came in below market expectations of a dip to 51.7%. The index, however, remains above the 50% threshold that separates expansion from contraction in the manufacturing sector, where it has been for nearly two years.
June’s drop came on the back of broad-based declines across sub-components of the index. Output and new orders growth expanded at a weaker pace in June. Moreover, foreign demand faltered as seen in a contraction in new export orders, suggesting that the oncoming trade war is starting to feed into the real economy. In addition, the sub-indices for stocks of inventories for raw materials and employment prospects sunk further below the 50% threshold in June, and supplier delivery times increased slightly.
The index for input prices—a gauge for overall inflation—rose in June due to higher global commodity prices.
Regarding June’s weaker PMI print, FocusEconomics panelist Nomura commented:
“The fall in June supports our view that the rebound of in May was short-lived. In fact, the year-on-year growth rates for industrial production, investment and retail sales all slowed in May, as end demand has been moderating due to rapidly shrinking credit supply from the shadow banking sector […] We believe the economy has yet to bottom out and expect things to get worse in coming months before the effect from easing measures becomes visible.”