An official survey released on Sunday revealed that China’s manufacturing activity declined for a second consecutive month in June while services activity dropped to a five-month low, reinforcing calls for more stimulus as the country’s economy struggles to recover.
The purchasing managers’ index (PMI) of the National Bureau of Statistics (NBS) was 49.5 in June, unchanged from May. This figure is below the 50-point threshold that divides growth from contraction and is consistent with a median forecast of 49.5 in a Reuters poll.
According to Xu Tianchen, senior economist at the Economist Intelligence Unit, “Actual industrial activity should be stronger than the data suggests. We observe that the official PMI fails to fully capture the current export momentum, which has been the major economic driver this year.”
However, Xu continued, there is still not enough domestic and international demand to absorb China’s manufacturing capacity, which will keep producer prices from rising.
The results of the NBS survey indicated that although a sub-index of production was above 50 in June, other indicators such as employment, raw material stocks, new orders, supplier delivery times, and new export orders were all in contractionary territory. Although China’s exports in May exceeded expectations, experts said it’s still unclear if these sales can continue.
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