The pulse of China’s industrial heartland has weakened again, with manufacturing activity falling for the second consecutive month in June.
The official purchasing managers’ index (PMI), released by the National Bureau of Statistics on Sunday came in at 49.5 for June.
It’s the same figure as May, but below the defining 50-point mark separating growth from contraction.
In other words, it shows activity slowed again.
New orders, raw material stocks, employment, supplier delivery times and new export orders, all contracted.
Production was one of the few sub-indices showing growth.
The non-manufacturing PMI, which includes services and construction, fell to 50.5 from 51.1 in May, the lowest since December.
The services PMI showed very marginal growth, but at 50.2, it’s the slowest growth in five months.
The construction PMI slipped to 52.3, the weakest reading since July last year.
“Actual industrial activity should be stronger than the data suggests as our observation is that the official PMI fails to fully capture the current export momentum, which has been the major economic driver this year,” Xu Tianchen, senior economist at the Economist Intelligence Unit, told Reuters.
Hao Zhou, chief economist at Guotai Junan International, said the weak figures pointed to the need for more support from the Chinese government.
“However, the room for monetary policy easing is limited for the time being, as the Chinese currency is under pressure,” Hao told Reuters.
“That said, fiscal policy is likely to take the driving seat, suggesting that the central government will need to issue more debt over the foreseeable future to boost the overall domestic demand.”
None of this is likely to be lost on Communist Party leaders gathering at the Third Plenum in Beijing later this month.