China said Tuesday that manufacturing activity expanded in June with the Purchasing Manager’s official index reaching 50.9.
Economists polled by Reuters expected the official manufacturing PMI number to hit 50.4. PMI readings above 50 indicate expansion, while those below this level indicate contraction.
In May, the official manufacturing PMI reached 50.6, according to the National Statistics Office. PMI readings are sequential.
The agency said in its announcement of the PMI reading that supply and demand are starting to pick up, and that the rate of new orders increases for two consecutive months, according to a CNBC translation. Better readings on both the import and export indexes are also helping, as the major economies reopen.
However, uncertainties persist, the office warned, adding that the pandemic has not been effectively controlled abroad.
The data showed that the index for new export orders was still in contracting territory, even though the reading improved, reaching 42.6 for the month of June from 35.3 in May.
China’s manufacturing activity has been affected by shocks on both the supply and demand fronts due to large-scale blockades in many parts of the world aimed at containing the coronavirus pandemic. The virus emerged late last year in the central Chinese city of Wuhan.
While Chinese factories struggled to fill orders at the start of the pandemic, they now face a drop in demand globally as the number of infected people exceeded the 10 million threshold, according to Johns Hopkins University. .
Meanwhile, the official services PMI reached 54.4 in June from 53.6 in May.
“These rising PMIs suggest that China’s recovery is still underway, but momentum could lose some strength in the coming months,” Nomura economists wrote in a note after the release of the PMI data.
The resurgence of new coronavirus cases in Beijing and some surrounding cities has dealt yet another blow to the domestic service sector, with renewed limits on social activities slowing the rate of recovery. That was evident from the nearly 69% drop in tourism revenue during the three-day Dragon Boat Festival that officially ended on Saturday.
“The Dragon Boat Festival vacation data suggests there was no clear recovery in the tourism sector between late April and late June,” added the Nomura economists.
Caixin and IHS Markit will release another factory dataset on Wednesday. This private survey features a larger mix of small and medium businesses. In comparison, the official PMI survey generally polls a large proportion of large companies and state-owned companies.
– CNBC’s Evelyn Cheng contributed to this report
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