July Caixin PMI shows factory activity growth slips

Staff work on a Panasonic SMT machine at guiyang Zhenxin Know-how Co., Ltd. in Guiyang, Guizhou Province, China, July 27, 2021.

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China’s manufacturing facility exercise development slipped sharply in July as demand contracted for the primary time in over a yr partially on excessive product costs, a enterprise survey confirmed on Monday, underscoring challenges going through the world’s manufacturing hub.

The Caixin/Markit Manufacturing Buying Managers’ Index (PMI) fell to 50.3 final month from 51.3 the month earlier than, the bottom degree since April 2020.

Analysts polled by Reuters had anticipated the index to ease to 51.1. The 50-mark separates development from contraction on a month-to-month foundation.

The Chinese language financial system has largely recovered from disruptions brought on by the coronavirus pandemic, nevertheless it has confronted new challenges in latest months resembling increased uncooked materials prices, which dragged on revenue development at industrial companies in June.

Policymakers have stepped up efforts to curb surging commodity costs which have squeezed producers’ margins.

The weaker leads to the personal survey, principally masking export-oriented and small producers, broadly aligned with these in an official survey launched on Saturday that confirmed exercise rising on the slowest tempo in 17 months.

“The financial system continues to be going through enormous downward strain,” mentioned Wang Zhe, senior economist at Caixin Perception Group, in feedback launched alongside the info. Excessive product costs introduced down demand, particularly for client items and intermediate items, mentioned Wang.

A sub-index for brand new orders slipped sharply into contraction for the primary time since Could 2020, whereas one other sub-index for manufacturing fell to the slowest tempo of growth since March final yr.

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Enter costs continued to rise, albeit at a slower tempo than the earlier month however a lot quicker than output costs, placing strain on margins. Surveyed enterprises mentioned uncooked materials costs, particularly for industrial metals, remained excessive.

“Market demand was delicate to product costs, which restricted enterprises’ pricing energy,” mentioned Wang.

Export orders grew barely quicker than the month earlier than however nonetheless at a gradual tempo because the pandemic dampened abroad demand. Factories employed extra employees for the fourth month in a row however at a slower tempo.

An index of confidence within the yr forward slipped to the bottom degree in 15 months.

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