Manufacturing PMI expands further, beating expectations

China’s manufacturing activities remained in expansion territory for a fifth consecutive month, official data showed on Friday.

The country's official manufacturing Purchasing Manager’s Index (PMI) rose to 51.1 in July from June’s 50.9, according to the National Bureau of Statistics. This is the highest reading since March and dashes earlier analysts' expectations of 50.7.

The above-expectation PMI came as the country’s efforts in coordinating epidemic control with economic and social development have effectively filtered through, Zhao Qinghe, a senior NBS statistician said.

“The rise in the July manufacturing PMI was mainly driven by a jump in the new export orders sub-index to 48.4, from 42.6 in June,” Nomura analysts said. 

The upbeat manufacturing PMI was broadly based across its sub-indexes.

Both demand and production improved as the production sub-index inched up to 54 in July, from 53.9 in June; while the new orders sub-index rose to 51.7 in July, from 51.4 in June.

Except for the chemical fiber, rubber and plastics industries, all 20 industries surveyed posted production sub-indexes above the 50-point threshold. Of note, the textile and clothing industry and the wood-processing industry reentered expansionary ground for the first time since the outbreak of the pandemic.

Imports and exports also showed improvement amid the rebooted world economy and China’s efforts to stabilize foreign trade. A sub-index for new import orders rose to 49.1 in July, from 47 in June; and a sub-index for new export orders jumped to 48.4, from 42.6 in June.

However, these readings are still below the 50 mark, indicating continued pressure on external demand. “The risk of recurrent waves of COVID-19 in overseas markets may continue to dim China’s export outlook,” Nomura cautioned.

By enterprise size, small companies continue to feel both supply and demand pressure, with a sub-index for them falling further into contraction.

Business in the Yangtze River Delta area also suffered from ongoing floods.

A PMI for large enterprises remained solid at 52 in July, despite a moderation from 52.1 in June, while that for medium-sized enterprises jumped to 51.2 from 50.2.

Meanwhile, the non-manufacturing PMI edged down, dragged by the services sector, the PMI for which fell to 53.1 in July from 53.4 in June. By contrast, the PMI for the construction sector jumped to 60.5 in July from 59.8 in June.

“Sporadic and moderate outbreaks of COVID-19 in China may restrain the pace of recovery in the services sector.” Nomura said.