China's June factory growth slows on Covid, supply chain snags, private survey finds

  • China's factory activity expanded at a softer pace in June, as the resurgence of Covid-19 cases in the export province of Guangdong and supply chain woes drove output growth to the lowest in 15 months, a private survey showed on Thursday.
  • The Caixin/Markit Manufacturing Purchasing Managers' Index fell to 51.3 last month from May's 52, marking the 14th month of expansion, but it came below analyst expectations for an only slight slowdown to 51.8.

China's factory activity expanded at a softer pace in June, as the resurgence of Covid-19 cases in the export province of Guangdong and supply chain woes drove output growth to the lowest in 15 months, a private survey showed on Thursday.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 51.3 last month from May's 52, marking the 14th month of expansion, but it came below analyst expectations for an only slight slowdown to 51.8.

The softer results in the private survey, mostly covering export-oriented and small manufacturers, are in line with those in an official survey, which showed factory growth dipped to a four-month low due to the drag from production.

A sub-index for output dropped to 51.0 in June, the lowest since March 2020, when the industrial sector started to rebound from Covid-induced paralysis. The growth in new orders also eased to a three-month low.

New export orders barely grew, compared with a robust expansion the previous month as rising Covid-19 cases across the world, especially of the more infectious delta variant, took a toll on demand.

More than 150 novel coronavirus cases have been reported in Guangdong province, a manufacturing and exporting hub in southern China, since the latest wave of cases struck in late May, prompting local governments to step up prevention and control efforts that have curbed port processing capacity.

However, there are some bright spots in the private survey, which showed firms added to their payrolls at the fastest pace in seven months, as they ramped up efforts to increase capacity in the months ahead amid improved customers demand.

Inflationary pressures eased a bit, with input prices rising at the slowest pace since November last year.

"The manufacturing sector has gradually returned to normal," said Wang Zhe, senior economist at Caixin Insight Group.

"In the second half of this year, the low base effect from last year will weaken. Inflationary pressure, coupled with the economic slowdown, is still a serious challenge for China."

Source: Read Full Article