China's Manufacturing Sector Shrinks On Trade Tensions
June 30 2019 - 10:35PM
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China's manufacturing activity contracted for the first time in
four months in June as trade tensions caused renewed declines in
sales, export orders and production, survey data from IHS Markit
showed Monday.
The Caixin manufacturing Purchasing Managers' Index fell to 49.4
in June from 50.2 in May. A score below 50 indicates
contraction.
According to official survey, the factory PMI held steady at
49.4 in June. The non-manufacturing PMI came in at 54.2 versus 54.3
in May, the official data from the National Bureau of Statistics
showed over the weekend.
The June PMIs support the assessment that the stabilization of
economic growth in late first quarter and early second quarter
would prove short-lived and that, given the so-far limited scale of
policy stimulus and the headwinds from US tariffs and cooling
global growth, a renewed slowdown is on the horizon, Julian
Evans-Pritchard, an economist at Capital Economics, said.
The central bank is likely to respond to this with additional
monetary easing, the economist added.
"It's crucial for policymakers to step up countercyclical
policies," Zhengsheng Zhong, director of macroeconomic analysis at
CEBM Group said. "New types of infrastructure, high-tech
manufacturing and consumption are likely to be the main policy
focuses."
Total new business contracted for the second time this year so
far, while the fall in exports followed from a renewed increase in
May, survey showed.
Consequently, manufacturers reduced their production, ending a
four-month sequence of expansion.
Further, manufacturers reduced their jobs in June. Nonetheless,
the pace of decline was broadly similar to those seen in the
remainder of the second quarter.
Despite reaching a seven-month high in June, the input cost
inflation rate remained mild in the context of historical survey
data. Similarly, there was a slight rise in factory gate charges,
following no change in May.
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