China'S Manufacturing PMI Fell To 50.4 In July

After the rapid release of manufacturing supply and demand after the health event in June, the recovery pace of manufacturing industry slowed down in July due to factors such as entering the traditional production off-season and the slight rebound of health events.

The Caixin China Manufacturing Purchasing Manager Index (PMI) for July, released on August 1, recorded 50.4, lower than 1.3 percentage points in June, still in the expansion range, indicating that the manufacturing industry's prosperity continued to improve, but the pace of recovery slowed down.

This trend is consistent with the Bureau of statistics manufacturing PMI. The PMI of manufacturing industry in July, released by the National Bureau of statistics, recorded 49.0, down 1.2 percentage points, and returned to the contraction range after a brief expansion in June.

From the sub index point of view, the manufacturing production index and new order index in July fell in the expansion range, indicating that the recovery speed of supply and demand in the manufacturing industry slowed down. According to the respondents, the relatively weak demand, the continuous impact of health events, and the superposition of power outages have jointly restricted the growth of output. However, orders for new products and intermediate products increased, while new product category data showed a decrease. Foreign demand was relatively stable. The new export order index in July continued the expansion trend of June, but the range was slightly smaller.

The manufacturing employment index in July was the lowest since May 2020. The survey shows that the employment contraction is related to cost reduction, sales downturn and the failure of employees to fill vacancies after voluntary resignation. Benefited from the decline of some commodity prices, the purchasing price index of manufacturing industry fell sharply in the expansion range in July, falling to the lowest level in the year; The sales side was greatly inhibited by weak demand, and the ex factory price index was lower than the boom and bust line for the third consecutive month, with a larger decline, but the ex factory price of consumer goods rose.

Affected by the shortage of suppliers' inventory and manpower, recent health events, etc., the supplier delivery time index in July fell below the boom and bust line again. Due to the relatively small number of new business, enterprises have enough capacity to deal with the backlog of orders, and the backlog of business decreased for the second consecutive month in July.

Some enterprises have been hoarding bulk commodities with the recent price drop, and the raw material purchasing volume has increased slightly, and the raw material inventory index has risen in the expansion range. Due to the delivery to customers and the reluctance to increase inventory due to weak demand, the finished goods inventory index remained in the contraction range, but the decline was narrowed.

Manufacturing enterprises remained optimistic in July, but production and operation expectation index fell slightly due to concerns about weak demand and rebound of health events.

Wang Zhe, a senior economist at Caixin think tank, said that the situation of the health events in July was better and the control measures were relaxed, which helped the manufacturing industry to recover continuously, but the recovery foundation is still not solid.. Supply and demand continued to improve and the pattern of strong supply and weak demand was maintained; The feedback of the employment market is still in the contraction range; The cost side has increased steadily, while the charging end has continued to decline, and the enterprise's profit is facing challenges; Market optimism remained, but there were also concerns about the economic outlook.

In his view, the main macroeconomic indicators in the second quarter showed that the short-term impact of this round of health events on the economy has gradually subsided, and the third quarter will be an important window period for economic recovery. The central government has made it clear that it will not issue super large-scale stimulus measures, and speeding up the implementation of existing policies to achieve effective results is a more pragmatic choice. In addition, the employment market continues to be under pressure, and the economic situation of low-income groups continues to deteriorate. Therefore, strengthening the efforts to stabilize employment and improving the level of subsidies and temporary assistance should be the key points of implementation.