July data signalled that the downturn in China’s manufacturing sector intensified at the start of the third quarter. Renewed falls in both total new work and new export orders led manufacturers to cut production at the fastest rate since November 2011. Softer client demand and reduced output requirements contributed to further job shedding and lower purchasing activity, with the latter declining at the sharpest rate since January 2012.
Meanwhile, deflationary pressures persisted, with both input costs and output charges declining in July and at faster rates than in the previous month.
Adjusted for seasonal factors, the Purchasing Managers’ Index™ (PMI™) posted at 47.8 in July. This was down from 49.4 in June and below the neutral 50.0 mark for the fifth successive month. Furthermore, the latest index reading signalled the sharpest deterioration in the health of the sector since July 2013.
Following a slight improvement in June, total new business received by Chinese manufacturers fell in July. Furthermore, the rate of decline was the quickest seen since March 2014. Data signalled that both domestic and foreign demand had softened in the latest survey period, as highlighted by new export work also falling in July after a slight pick up in June.
Weaker market conditions and an associated downturn in client demand contributed to a third successive monthly contraction of manufacturing production in July. Moreover, the latest reduction in output was the sharpest seen in 44 months.
Fewer new orders underpinned a renewed contraction of purchasing activity in China’s manufacturing during July. Furthermore, the rate of reduction was the sharpest seen since January 2012. Stocks of purchases also fell on the month, albeit at a modest rate, with some companies linking lower inventories to ongoing stock adjustments. Inventories of finished goods were meanwhile little-changed when compared to June.
Staff numbers at Chinese manufacturers declined for the twenty-first consecutive month in July. Despite the rate of job shedding easing since June, it was marked overall. According to anecdotal evidence, employment fell due to company down-sizing policies that were implemented in light of softer client demand. Backlogs of work meanwhile rose at a marginal pace that was identical to that recorded in June, with some panellists mentioning that reduced output had led to greater amounts of unfinished work.
Average input costs faced by Chinese manufacturing companies declined again in July. Furthermore, the rate of reduction accelerated to the sharpest seen since April. Reports from panellists suggested that lower raw material costs had reduced overall cost burdens. Average selling prices also fell in July, and at the sharpest rate since January, with a number of firms cutting their charges due to increased competition for new work.
China Manufacturing Activity Slips in July Official China Manufacturing Purchasing Managers’ Index Weakens to 50.0
China’s official manufacturing purchasing managers index slipped to 50.0 in July from 50.2 in June, the National Bureau of Statistics said Saturday.
Subindexes showed weakness across a broad front, including output as well as new orders and new export orders along with employment and prices for materials.
“Both domestic and external manufacturing remain weak,” said Zhao Qinghe, an economist with the statistics bureau, in a statement accompanying the data on Saturday. He noted, however, that storms and flooding in key manufacturing centers in eastern and southern China also may have put a temporary dent in factory output in the period.