Financial Observation: Caixin China'S Manufacturing PMI Fell To 50.5 In June, Expanding For Two Consecutive Months

In June, the prosperity of the manufacturing industry was still higher than the critical point, but the expansion rate slowed down, indicating that the production and operation activities of the manufacturing industry slowed down and the market confidence continued to fall.

The Caixin China Manufacturing Purchasing Manager Index (PMI) released on July 3 recorded 50.5 in June, a slight decrease of 0.4 percentage points compared with May, and was in the expansion range for two consecutive months.

This trend is not consistent with the National Bureau of Statistics. The PMI of manufacturing industry in June released by the Bureau of Statistics rose slightly to 49.0, 0.2 percentage points higher than that in May, and was lower than the boom and bust line for three consecutive months.

From the sub data, the expansion speed of production and demand in the manufacturing industry slowed down to varying degrees. In June, the manufacturing production index declined significantly from the 11 month high in May, but remained above the boom and bust line; The index of new orders in the manufacturing industry also fell slightly in the expansion range. In terms of three major categories of goods, only the demand for consumer goods increased, the intermediate categories were basically flat, and new orders for investment categories decreased.

In terms of external demand, the index of new export orders in June was only slightly higher than the critical point, indicating that the new overseas business volume had little change. Sample enterprises reflect that the global economic situation has weakened, leading to sluggish exports. Specifically, external demand for consumer goods and investment goods declined, while that for intermediate goods rose slightly.

After recording the lowest level since March 2020 in May, the manufacturing employment index rebounded slightly in the contraction range in June, still significantly lower than the boom and bust line. The enterprise said that because the sales were lower than expected, the capacity was readjusted, so the employment was reduced. The employment of the three major categories of products has shrunk, with the investment category being the most obvious. In June, the backlog index returned to above the critical point, but the backlog rate was relatively low. The increase in new business volume of some enterprises has led to an increase in the backlog of orders, but some enterprises said that they have sufficient capacity to process orders in a timely manner.

The price reduction of raw materials continued to drive down the cost of manufacturing industry. In June, the purchase price index of raw materials for manufacturing industry declined slightly in the contraction range, including the cost of intermediate and investment categories, and consumer categories rose slightly. With the decline of costs and the intensification of market competition, enterprises continue to reduce prices and promote sales, and the ex factory price index rises slightly in the contraction range, still significantly lower than the boom and bust line.

The improvement of raw material supply, coupled with the manufacturer's demand for suppliers to speed up delivery due to sales growth, the supplier delivery time index in June continued to be higher than the critical point, but fell slightly compared with the previous month.

In June, the expected index of manufacturing output continued to slow down in the expansion range, falling to the lowest level since November 2022. The survey shows that 17% of manufacturers expect to increase production in the next year, because the economy at home and abroad will improve, supporting the rise of customer demand, and 6% of enterprises expect to reduce production, expressing concern about the relatively weak market situation.

Wang Zhe, senior economist of Caixin Think Tank, said that the current economic recovery foundation is not solid, the repair speed is not as fast as expected, and the lack of endogenous impetus for economic growth, weak demand and poor market expectations are still outstanding problems. The decline in employment level, the increase in deflation pressure and the downplaying of optimistic expectations reflected by Caixin's manufacturing PMI in June also point to this fact. In the future, relevant policies should strengthen support at the macro level, improve efficiency at the micro level, ensure that policy dividends reach market players directly, and effectively improve employment and market expectations.