July Caixin China Manufacturing Industry PMI Recorded 49.9

The July Finance New China Manufacturing Purchasing Managers Index (PMI) released recently recorded 49.9 points, up 0.5 percentage points from June, and continues to be below the dividing line between prosperity and decline, but the decline has narrowed. The trend is consistent with the PMI of manufacturing industry of the National Bureau of Statistics. The PMI of manufacturing industry published by the National Bureau of Statistics in July recorded 49.7 points, which is 0.3 percentage points higher than that in June. The improvement of PMI in Caixin's manufacturing industry in July is partly due to the rebound in output. The output index returned to the expansion range in July. Some manufacturers say demand has improved relatively, driving output to stabilize. The total volume of new orders also ended the small contraction at the end of the second quarter, showing a slight expansion. The growth momentum was mainly from the improvement of domestic demand, while the new export orders remained flat. Some manufacturers reported that Sino-US trade disputes continued to bring pressure on export sales. The weak performance of orders led to four consecutive months of contraction in employment, and the manufacturing employment index continued to shrink in July, the lowest since February.

Manufacturers' purchasing activities expanded again in July. However, in view of the relatively weak demand, manufacturers took a prudent attitude towards inventory, and both input inventory and finished inventory declined. Manufacturers reported that average input costs continued to rise in July, but slightly. At the same time, in order to stimulate customer demand and promote the growth of new orders, the ex-factory price index has fallen into a contraction range for the first time since January.

In July, the industry's optimism about production prospects in the next 12 months rose from the lowest level in June to the highest level in three months, but it is still at a historically low level. Manufacturers expect market conditions to improve and new products to come out. However, the overall confidence of the industry is still affected by concerns about the outcome of the Sino-US trade negotiations. Zhong Zhengsheng, chairman and chief economist of Monita Research, a financial think tank, said that China's economy showed signs of recovery in July, and entrepreneurs'confidence had been restored, reflecting the strong resilience of China's economy and the effectiveness of underpinning policies such as tax cuts and fee cuts. As a result, the real estate regulation and financial supervision policy will be strengthened.