China: PMIs lost traction in June – UOB

UOB Group’s Economist Ho Woei Chen, CFA, assesses the latest PMI prints in the Chinese economy.

Key Quotes

“Both the manufacturing and non-manufacturing Purchasing Manager’s Indexes (PMIs) from China Federation of Logistics & Purchasing (CFLP) recorded their 16th consecutive month of expansion in June (defined as a reading >50). While the manufacturing PMI showed a generally stable trend, the unexpected weakening in the non-manufacturing PMI is concerning given expectations of a stronger recovery in the services sector in the second half of the year. COVID19 remains a key drag to services recovery as new infections are still being detected and this has led to massive testings and temporary restrictions on some travel.”

“The CFLP manufacturing PMI moderated for the third straight month, down by 0.1 pt to 50.9 in June (May: 51.0) but this is still slightly better than Bloomberg’s estimate of 50.8, largely pointing to a stable outlook in the manufacturing sector.”

“Production fell (51.9 from 52.7 in May) while new orders edged higher (51.5 from 51.3 in May). New export orders (48.1 from 48.3 in May) and employment (49.2 from 48.9 in May) remained in contraction.”

“The CFLP non-manufacturing PMI was well-below consensus expectation in June as it fell 1.7 pt to 53.5 (Bloomberg est: 55.3, May: 55.2). This is the lowest since February.”