China’s manufacturing sector unexpectedly shrinks in July- Caixin PMI

Investing.com-- Chinese manufacturing activity unexpectedly shrank in July, private purchasing managers index data showed on Thursday, furthering the notion that the country’s biggest economic engines were cooling. 

The Caixin manufacturing PMI read 49.8 in July, missing expectations of 51.4, and slowing sharply from the 51.8 in June. A reading below 50 indicates contraction, with the Caixin reading shrinking for the first time since October.

The reading was in line with official manufacturing PMI data released on Wednesday, which showed the sector contracting for a third consecutive month. 

The Caixin reading diverged from the official data for most of 2024, given that it surveys smaller, private companies in Southern China, while the official PMI covers larger state-run enterprises in the North. 

But Thursday’s reading indicates that manufacturing activity may be slowing more uniformly across the country.

July’s reading also reflects the impact of steep import tariffs imposed by the European Union on China, specifically the country’s electric vehicle industry. 

“The most prominent issues are still insufficient effective domestic demand and weak market optimism,” Wang Zhe, senior economist at Caixin Insight Group wrote in a note.

The weak PMI readings, coupled with some encouraging comments from Chinese officials on more stimulus measures, spurred some bets that Beijing will roll out more policy support in the coming months. But analysts also cautioned that the execution over the measures will be crucial for an economic recovery in the country.