China posts cooler manufacturing activity in June

China's manufacturing activity cooled slightly in June, but the pace of growth remained moderate overall, according to a private report on Monday.

The Caixin China General Manufacturing Purchasing Managers’ Index dipped 0.1 to 51.0 last month from May, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

A reading above 50 signals growth while one below 50 means contraction. 

The trend echoed the decline in the official PMI released by the National Bureau of Statistics over the weekend which fell by 0.4 to 51.5 in May from a month earlier.

As a result, the Caixin Manufacturing PMI averaged 51.1 in the second quarter, down from 51.4 in the first three months.

Companies sustained increases in output, suggesting that manufacturing supply was relatively strong, according to the Caixin report. However, demand from overseas remained subdued as the index for new export orders fell for the third month running to the lowest to date, the report said.

"New export orders remained negative, pointing to a grim export situation amid escalating trade disputes between China and the US, which led to weak demand across the manufacturing sector," said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

Lu Ting, economist at Nomura, attributed the decline in the new orders sub-index and the new export orders to stronger downside pressure on external demand than on domestic demand.

Meanwhile, the rate of job losses was the steepest seen for 11 months amid retirement, company downsizing and insufficient workload. 

Zhong said the drop in the employment index for the second straight month indicated worsening layoffs.

The rate of input price inflation rose the sharpest in five months in June, with several firms hit by rising raw material costs. Manufacturers then raised their prices charged by the steepest rate since last September, the report said.

But Zhong said that goods producers in China "remained optimistic that production levels would rise over the next year. However, the level of positive sentiment was the lowest recorded for six months on concerns of rising costs and stricter environmental policies."

In contrast, Nomura held a more negative outlook that "the economy has yet to bottom out, and things will more likely get worse in coming months."