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China’s Manufacturing Activity Expanded in June, but Uncertainty Remains

Economic News: On Tuesday, China said its manufacturing activity expanded in June. The official Purchasing Managers Index (PMI) was at 50.9. Economists had expected the manufacturing PMI number to come to 50.4.

Manufacturing PMI readings of above 50 indicate expansion, while lower levels indicate contraction.

The National Bureau of Statistics’ official manufacturing PMI was at 50.6 in May.

The bureau said that demand and supply were starting to pick up, with the index of new orders rising for two months straight.

Better readings in imports and export indices are also helping as major economies reopen.

 

Uncertainties remain, as major economies reopen.

However, uncertainties remain, as the bureau cautioned, saying the pandemic has not been controlled overseas effectively.

According to data, the index for new export orders was still cautionary, even though it had improved coming to 42.6  in June from 35.3 in May.

Shocks in the demand and supply fronts have hit China’s manufacturing activity due to large lockdowns globally. Countries worldwide aimed to contain the coronavirus pandemic through lockdowns.

Early on in the pandemic, Chinese factories faced challenges in fulfilling orders. Now, they face a global demand slump as the number of infected people surpasses the 10 million mark, says Johns Hopkins University

Meanwhile, the official PMI was at 54.4 in June from 53.6 in May.

However, Nomura economists say, the rising PMIs suggest China’s recovery is on track, but the momentum could go down in the coming months.

 

The resurgence of coronavirus

China and some surrounding cities are experiencing a resurgence. This resurgence has dealt another big blow to their domestic services sector, coupled with limited social activities and has dampened their recovery pace.

The tourism revenue dropped by nearly 69% during the 3-day Dragon Boat Festival, which ended on Saturday.

Nomura economists suggested that recovery in the tourism sector between April and June had no precise recovery.

Caixin and IHS Markit will release another round of data on Wednesday. The private survey features a larger mix of small and medium-sized companies. The Official PMI survey polls a broad blend of big businesses and state-owned companies.

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