Influenced by a slight increase in new orders driven by improved domestic demand, the manufacturing PMI of Caixin China rebounded in July, ending the previous sustained contraction and showing signs of recovery in manufacturing production, but still below the threshold. In addition, given the continued weakness of overall demand, the Sino-US trade disputes and the weakening of the global economy remain cloudy, and the industry confidence index remains low.
The seasonally adjusted purchasing managers index (PMI) of China's manufacturing sector rose to 49.9 in July from 49.4 last month, close to the critical value of 50 and higher than the median value of 49.6 estimated by Reuters survey, Caixin/Markit announced on Thursday. The new order index rose slightly to 50.2, returning to the critical value, and new orders for consumer goods increased in the month.
"China's manufacturing sector showed signs of recovery in July, and business confidence rebounded, reflecting the strong resilience of the economy." Zhong Zhengsheng, director of macro-research at Monita, a financial think tank, said that policies such as tax cuts and fee reductions had played a role, in which case the authorities might continue to regulate the real estate market and the financial industry.
He also pointed out that China's domestic demand has rebounded and overseas demand has remained stable; the employment sub-index has further declined to negative value, indicating that the employment market has not improved.
According to a press release provided by Markit, the improvement of the PMI index in July was partly due to the stable output, the end of the slight contraction in June, and the relative improvement in demand, so some manufacturers voted to keep their output unchanged, which also led to a slight rebound in the total volume of new orders. However, the ongoing Sino-US trade disputes continue to put pressure on export sales, and the volume of new export orders did not improve in July.
In terms of price index, the input price index is only slightly higher than the critical value, indicating a slight increase in the cost burden during the month, mainly related to the increase in the price of raw materials. At the same time, in order to enhance competitiveness and attract new orders, factory prices of manufactured products have fallen for the first time since January, a small decline, but it has been one of the highest in more than three years.
In terms of employment, China's manufacturing employment contracted for the fourth consecutive month in July. Although this month's contraction rate is small, it is the most significant since February. According to the respondents, in view of the weak performance of production and new orders, some firms did not fill vacancies after employees voluntarily resigned, and some firms said that the purpose of reducing employment was to help reduce costs. The shortage of manpower has led to an increase in the amount of unfinished work recently.
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