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China says factory activity expanded in June, but resistance still exists



China said on Tuesday that manufacturing activity expanded in June, with the official purchasing manager index of 50.9.

Economists surveyed by Reuters had expected the official manufacturing PMI index to be 50.4. PMI readings above 50 indicate expansion, and signals below this level contract.

According to data from the National Bureau of Statistics, the official purchasing managers index for manufacturing in May was 50.6. The PMI reading is continuous.

The Bureau said in its PMI reading that supply and demand began to pick up. According to CNBC̵

7;s translation, the new orders index rose for two consecutive months. With the reopening of major economies, a good reading of the import and export index also helps.

However, the bureau warned that uncertainty still exists, adding that the pandemic has not been effectively controlled overseas.

The data shows that despite the improved readings, the new export orders index is still in a contraction zone, rising from 35.3 in May to 42.6 in June.

Due to the large-scale blockade in many parts of the world to contain the coronavirus pandemic, China’s manufacturing activities have been hit by supply and demand. The virus first appeared in Wuhan, a city in central China, in the second half of last year.

Johns Hopkins University said that although it was difficult for Chinese factories to meet order requirements in the early stages of the pandemic, they are now facing a downturn in global demand as the number of infected people exceeds the threshold of 10 million people worldwide.

At the same time, the official services PMI rose from 53.6 in May to 54.4 in June.

Nomura economists wrote in a report after the release of PMI data: “These rising PMIs indicate that China’s recovery is still in the pace, but this momentum may lose momentum in the coming months.”

New outbreaks of new coronavirus cases in Beijing and some neighboring cities have once again hit the home service industry, and new restrictions on social activities have limited the pace of recovery. This is evident from the 69% decline in tourism revenue during the three-day Dragon Boat Festival, which officially ended on Saturday.

Economists at Nomura added: “The Dragon Boat Festival holiday data shows that there was no significant recovery in the tourism industry between the end of April and the end of June.”

Caixin and IHS Markit will release another set of factory data on Wednesday. This private survey is characterized by the larger size of SMEs. In contrast, official PMI surveys usually survey a large percentage of large and state-owned enterprises.

— CNBC’s Evelyn Cheng contributed to this report


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