China: The manufacturing sector loses momentum – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest PMI data releases in the Chinese economy.

Key Quotes

“The manufacturing and non-manufacturing Purchasing Manager’s Indexes (PMIs) from China Federation of Logistics & Purchasing (CFLP) softened in July but had continued to remain in the expansion territory (defined as a reading >50). The weaker outlook for the manufacturing sector was also seen in the private-sector Caixin manufacturing PMI which slumped by 1.0 pt to 50.3 in July (Bloomberg est: 51.0; June: 51.3). This is the lowest reading since April 2020.”

“A number of factors could have contributed to the weaker outlook for the manufacturing sector including high commodity prices, supply disruptions that could have been exacerbated by floods in central China, as well as COVID-19 infection resurgence in various parts of the world that increased uncertainties.”

“The CFLP manufacturing PMI has continued to decline, falling by a larger than expected pace of 0.5 pt to 50.4 in July (Bloomberg est: 50.8; Jun: 50.9). The reading is now at its lowest since China’s recovery from its massive pandemic outbreak in early-2020.”

“The CFLP non-manufacturing PMI fell 0.2 pt to 53.3 in July (Bloomberg est: 53.3, Jun: 53.5) but this was in line with consensus expectation and showed a generally more stable outlook in the non-manufacturing sector compared to the manufacturing sector.”