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China’s manufacturing activity expanded at a stronger pace in June, as the economy continued to rebound after the government lifted tight locks and increased investment, but export orders remained weak as the global crisis in coronavirus destroys demand.
The official Manufacturing Purchasing Manager (PMI) index reached 50.9 in June, compared to May 50.6 data from the National Bureau of Statistics (NBS), and it was above the 50.4 forecast in a Reuters analyst survey.
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The 50-point mark separates the expansion from the contraction monthly.
The rebound was based on the accelerated rate of expansion of production, which grew to 53.9 in June from 53.2 the previous month.
The indicator of total new future orders also brightened, rising to 51.4 from 50.9 in May, suggesting that domestic demand is picking up as the non-ferrous metals to general equipment and electrical machinery industries showed improvement.
But export orders continued to contract, albeit at a slower pace, with a sub-index of 42.6 compared to 35.3 in May, well below the 50-point mark.
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“Although the PMI index recovered this month and the manufacturing sector recovered steadily, it is also important to see that the uncertainty persists,” NBS official Zhao Qinghe said in a statement accompanying the data.
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The high-frequency Chinese data tracked by Nomura showed a number of better-than-expected indicators recently, including energy production, property and car sales, prompting the brokerage to raise its GDP growth forecast to the second quarter to 2.6% from 1.2%.
While higher spending, particularly on infrastructure, was expected to boost economic activity for the rest of this year, some analysts cautioned against being overly optimistic about the outlook due to uncertainties surrounding the COVID-19 pandemic.
Export demand has remained weak with infections steadily increasing worldwide. Some fear that a global recession will turn out to be more pronounced than expected should a second wave of coronavirus cases force many countries to reimpose strict blockades.
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In addition to national concerns, there is a group found earlier this month, which has steadily grown to more than 200 cases associated with a Beijing-based food market, underscoring the ever-present economic threat posed by the virus.
Beijing has announced a series of measures to boost the economy and support jobs, but the global recession has meant that activity remains uneven in most sectors.
Despite increased demand, factories cut staff for the second time in June since they reopened, with a sub-index falling to 49.1 from 49.4 in May, according to the survey.
A separate official survey of China’s service sector showed that activity expanded at a faster rate in June. The non-manufacturing purchasing managers’ index rose to 54.4, from 53.6 in May, suggesting a steady stabilization of business confidence.
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Still, a subindex for construction activity, a key driver of growth, fell to 59.8 from 60.8 the previous month, the survey showed, highlighting the uneven nature of the recovery.
(Report by Yawen Chen and Ryan Woo; Shri Navaratnam Edition)
