China's Caixin Manufacturing PMI eases to 50.6 in July, matches estimates

China's July Caixin manufacturing PMI came in at 50.6 vs. 50.6 expected and 50.8 last, hitting fresh fourteen-month lows.

On Friday, the purchasing managers' index (PMI) for China's manufacturing sector arrived at 51.3 in July, a tad firmer from 51.2 booked in June, the National Bureau of Statistics (NBS) showed.

Summary

August survey data signalled a further improvement in Chinese manufacturing operating conditions. Output continued to expand, and at a quicker pace than in July. However, new orders rose at the slowest rate since May 2017, while export sales declined for the fifth month in a row. At the same time, employment remained on a downward trend which, in turn, contributed to an increase in outstanding workloads. Inflationary pressures meanwhile picked up, with firms noting steeper increases in both input costs and output charges. Confidence towards future output remained stuck near June’s six-month low, with a number of panellists citing concerns over the impact of the ongoing China-US trade war and relatively subdued market conditions.

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted above the neutral 50.0 level at 50.6 in August. However, this was down from 50.8 in July and signalled the weakest improvement in the health of the sector since June 2017.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: ““The Caixin China General Manufacturing PMI slipped to 50.6 in August from July, marking the third straight monthly drop and its lowest level since June 2017. “

“The subindexes for new orders and output both remained in expansionary territory, with the former falling and the latter climbing up. This showed cooling demand and strong supply existed at the same time across the manufacturing sector.”

“The employment subindex, remaining in contractionary territory, dipped to its lowest level since July 2017. The subindex for new export orders inched up despite remaining in contractionary territory, implying a still-grim export situation.”