China: Manufacturing PMI drops to over one-year low in July
July 31, 2021
The National Bureau of Statistics' Manufacturing Purchasing Managers' Index (PMI) came in at 50.4 in July, down from June's 50.9 and potentially linked to the rise of the Delta variant at home and in other parts of Asia. July's result marked the worst performance since February 2020. As a result, the index remained above the 50-threshold, pointing to a continued, albeit moderating, improvement in business conditions from the previous month.
The headline print reflected a deterioration in growth of output and new orders. In addition, purchasing activity growth slowed. Looking at firms according to their size, the PMI of both medium and small companies declined, while the PMI of large companies was stable.
Meanwhile, the Caixin Manufacturing PMI fell from 51.3 to 50.3, while the National Bureau of Statistics' non-manufacturing PMI fell to 53.3 in July from 53.5 in June, due to softer construction momentum amid tighter regulatory oversight of the sector.
On the near-term outlook, analysts at Nomura stated:
“Although we believe this latest wave of Covid-19 will be eventually brought under control in coming months, it has been driven by the Delta variant, which tends to be more infectious, so social distancing measures may remain in place for a longer period of time, despite the continued vaccine rollout. We expect the manufacturing PMI to moderate further in August, and the services PMI to drop significantly due to the Delta variant.”
Author: Oliver Reynolds, Economist