China's factory activity witnessed a decline for the second consecutive month in June. According to the National Bureau of Statistics, China's official manufacturing Purchasing Managers' Index (PMI) remained unchanged at 49.5 in June, matching the May figure. A PMI reading above 50 usually indicates expansion.
The sub-index for new orders at factories slightly declined to 49.5 due to weakening demand, however, the gauge for new export orders remained unchanged at 48.3.
On the other hand, the non-manufacturing activity index covering construction and services dropped to 50.5. This figure was lower than the forecasted 51 and down from May's reading of 51.1, as per a report by Bloomberg.
China's economy has shown a volatile performance this year. While manufacturing space managed to stand out at times, consumption has been hindered by an extended real estate crisis. The ongoing contraction in the manufacturing sector poses a risk to China's economic growth target for this year. The growth target for the dragon nation stands at around 5 per cent.
NBS analyst Zhao Qinghe recently made a statement, that “the foundation for sustained recovery and improvement still needs to be consolidated.”
On the global front, trade tensions have compounded the challenges for the dragon nation. Both US and EU (China's largest export markets) have reportedly expressed their concerns around rising Chinese exports with price bands in the lower levels. They argue that this surge is owing to an unfair boost resulting from massive subsidies by Beijing.
The construction index fell to 52.3 in June from 54.4 in May, its lowest level since July 2023. As per the report, this decline indicates that government spending on infrastructure, which has been crucial for economic recovery, has slowed down.
