China's June factory activity records faster expansion, shows steady recovery

Cornelia Mascio
Luglio 1, 2020

China's factory activity expanded at a stronger pace in June after the government lifted lockdowns and stepped up investment, but persistent weakness in export orders suggests the coronavirus crisis will remain a drag on the economy for some time.

The official manufacturing purchasing managers' index (PMI) for the country's manufacturing sector rose to 50.9 in June, up from 50.6 in May, the National Bureau of Statistics (NBS) said on Tuesday.

While higher spending, particularly in infrastructure, was expected to boost economic activity for the rest of this year, some analysts have warned against being overly optimistic about the outlook, given uncertainties around the Covid-19 pandemic.

The 50-point mark separates expansion from contraction on a monthly basis.

The sub-index for production edged up 0.7 percentage points to 53.9 in June.

He added that in terms of industry, the manufacturing new orders index and production index of medicine, nonferrous metals, general equipment and electrical machinery have seen significant improvement compared to last month, indicating a recovery in market demand.

As major global economies resumed business successively, external demand recovered but remained sluggish, with the sub-index measuring new export orders increasing 7.3 percentage points to 42.6, NBS data showed.

While most of the economy has reopened, many manufacturers are still struggling due to weak overseas orders as global demand falters.

A separate official survey on China's services sector showed activity expanded at a faster clip in June.

"Company data suggest online retail sales, which account for 20% of total retail sales, have been quite solid in June", it wrote, underlining that e-commerce giant JD.com reported a transaction volume of 269.2 billion yuan during its shopping festival between June 1 and 18. The composite PMI, which includes both manufacturing and services activity, rose to 54.2 in June from last month's 53.4.

Still, a sub-index for construction activity, a key driver of growth, fell to 59.8 from 60.8 the previous month, the survey showed, highlighting the uneven nature of the recovery.

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