China's June manufacturing remains in expansion zone

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Workers of a quartz glass company check quartz tubes at Jinping industrial park of Haizhou District in Lianyungang, east China's Jiangsu Province, June 30, 2020. [Photo/Xinhua]

China's manufacturing activity expanded for the 16th consecutive month in June but at a slower pace due to chip and power supply shortages and minor resurgence of COVID-19 in certain areas, official data showed.

The purchasing managers' index (PMI) for China's manufacturing sector came in at 50.9 this month, slightly down from 51 in May, data from the National Bureau of Statistics (NBS) showed on Wednesday.

A reading above 50 indicates expansion, while a reading below reflects contraction.

China's manufacturing sector continued to expand steadily with the PMI still in the expansion zone, said NBS senior statistician Zhao Qinghe.

The sub-index for production stood at 51.9, down 0.8 percentage points from a month earlier, indicating a slowdown in the expansion of production.

Zhao has attributed the ease in production at some companies to constraining factors such as the chip shortage, inadequate supply of coal and power, and the maintenance of equipment.

"The production and new order indexes of the vehicle manufacturers have contracted for two months," said Zhao, adding that factors, including the chip shortage, have brought negative effects to industry development.

Despite the moderation of PMI in June, Nomura Securities said that the country's PMI prints were still solid in the second quarter of the year, which shows the resilience of China's economy.

In its latest report, the World Bank noted that China's recovery has broadened and forecasted China's economic growth to be 8.5 percent in 2021.

Growth in new orders picked up, with the new order sub-index up by 0.2 percentage points to 51.5 in June, which shows that domestic demand in the manufacturing sector continued to grow.

Driven by market demand and mid-year consumption promotion campaigns, the PMI for consumer goods manufacturing rose to the highest point in almost five months.

A sub-index of the June PMI has shown that the quick price rise of some raw materials in China has initially been curbed.

The purchasing price index of major raw materials has declined to 61.2 this month, down by 11.6 percentage points from May, as China has taken a slew of measures to guarantee the supply of raw materials and stabilize the price.

The Nomura expects the manufacturing PMI to rebound in July considering the release of pent-up demand following the containment of the latest resurgence of epidemic and the recovery of some ports in southern China.

Wednesday's data also showed that the PMI for China's non-manufacturing sector came in at 53.5 in June, down from 55.2 in May.

Zhao said that epidemic situations in some parts of the country have weighed on the services sector, but the above-expansion-zone reading still pointed to steadily reviving business activities in the sector. 

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