- Wednesday, October 16, 2024
China's manufacturing sector experienced a significant downturn in July, with a private gauge indicating a contraction. Slower output and weaker market demand were the primary factors contributing to this decline.
According to data released on Tuesday by Caixin Media Co. and S&P Global, the China Caixin manufacturing purchasing managers index (PMI) fell from 50.5 in June to 49.2 in July. This is the first time in three months that the Caixin manufacturing PMI dropped below the 50 mark, indicating a shift from expansion to contraction.
Caixin reported that the subindexes for total new orders and output reached their lowest levels since December and January, respectively. Additionally, the subindex tracking new export orders plummeted to its lowest reading since September.
Analyst Wang Zhe from Caixin Insight Group attributed the contraction to lukewarm market demand and a simultaneous reduction in supply. "Both manufacturing supply and demand contracted. The market has been lukewarm, with sluggish demand, and supply has shrunk in tandem," Zhe explained.
In an effort to reduce costs and enhance efficiency, manufacturers trimmed their workforce in July. However, the contraction in staffing was only marginally smaller than in the second quarter.
Despite this gloomy outlook, manufacturers surveyed by Caixin remained optimistic about future output. The subindex tracking their expectations for future output remained above 50, but it fell below the historical average.
It is worth noting that China's official manufacturing PMI, which monitors larger manufacturers, also indicated a contraction in July. Official data released on Monday revealed an improvement from 49 in June to 49.3 in July.
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