China's Caixin manufacturing PMI slips into contraction at 49.4 in June, Aussie gives up 0.70

China's June Caixin manufacturing PMI came in at 49.4 vs. 50.0 expected and 50.2 last, as modest fall in new work dragged production into contraction.

On Sunday, the purchasing managers' index (PMI) for China's manufacturing sector arrived at 49.4 in June, the same as that seen in May, the National Bureau of Statistics (NBS) reported.

Summary

“June data highlighted a challenging month for Chinese manufacturers, with trade tensions reportedly causing renewed declines in total sales, export orders and production. Companies responded by reducing headcounts further and making fewer purchases of raw materials and semi-finished items. At the same time, selling prices were raised following another increase in input costs, though rates of inflation were negligible. Business sentiment was broadly neutral at the end of the second quarter, with firms mainly concerned about the US-China trade dispute

The latest figure was, however, indicative of only a marginal deterioration in operating conditions. Amid reports of trade tensions, total new business and international sales declined at the end of the second quarter. The former contracted for the second time in 2019 so far, albeit moderately. Concurrently, the fall in exports followed from a renewed increase in May.”

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: 

“The Caixin China General Manufacturing Purchasing Managers’ Index was 49.4 in June, the second lowest since June 2016, indicating a clear contraction in the manufacturing sector.

1) The subindex for new orders slid into contractionary territory, pointing to notably shrinking domestic demand. The gauge for new export orders returned to contractionary territory, but was better than the levels seen from last April to last December. Front-loading by exporters was likely to support this gauge as the China-U.S. trade relationship was under great uncertainty.

2) The output subindex fell into contractionary territory. The employment subindex remained relatively stable in negative territory, likely due to government policies to stabilize the job market. The State Council set up a leading group on employment in late May.”