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Manufacturing activity slows down in June
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MANUFACTURING activity in China’s large companies slowed slightly last month, while activity in the private sector was down by the most in four months, leading the market to expect slower GDP growth in the second quarter.
The official purchasing managers’ index, reflecting conditions in largely state-owned manufacturers, edged down to 50 in June from May’s 50.1, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing, ending three months of expansion.
The Caixin China PMI, slanted toward private and export-oriented companies, fell to 48.6 in June from 49.2 in May. It was the 16th successive month the reading had been below the neutral 50 mark.
Zhao Qinghe, a bureau analyst, attributed the lower official PMI to cooler activity in high energy-consumption industries and sluggish demand at home and abroad.
Measures to cut overcapacity reduced the PMI for high energy-consumption industries by 0.9 points from May to 48.2 last month, the data showed, while new orders fell for the third consecutive month to 50.5.
But Zhao noted activities in advanced manufacturing and high technology sectors accelerated, and the production component index in the official PMI rose for the second month to 52.5 points.
Of the Caixin data, Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, said: “Overall, economic conditions in the second quarter were considerably weaker than in the first quarter, which means there has been no easing of the downward pressure on growth. ”
The headline index was hurt by faster contraction in output and new orders, the Caixin data showed.
Employment has been falling for the past 32 months as part of companies’ efforts to cut costs and raise efficiency, the Caixin report said.
Australia and New Zealand Banking Group said in a note that China’s GDP growth is likely to attain a lower rate of 6.5 percent in the second quarter, compared with the first quarter’s 6.7 percent.
“Economic indicators such as fixed asset investment and retail sales declined in May, and now the PMI data suggest that China’s industrial production expansion is unlikely to stay at 6 percent year on year in June,” ANZ said. “The government will likely support growth through fiscal policy. Given the lingering concern over debt and leverage, cuts in interest rates and reserve requirement are possible but will proceed very cautiously.”
Also released yesterday, the official non-manufacturing PMI for June — a gauge of service activity — rose to 53.7 from May’s 53.1 points, reversing declines in the previous two months.
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