A private survey showed on Monday that China’s manufacturing activities accelerated in June, suggesting the world’s second-largest economy maintained stability despite headwinds at home and abroad.
The Caixin China General Manufacturing Managers’ Index (PMI) climbed from 49.6 in May to June’s 50.4, beating forecasts and marking a three-month high, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co. Ltd. A reading above 50 indicates expansion, while a reading below 50 represents contraction.
This came after an official survey showed the manufacturing PMI beat expectations to hit 51.7 in June, which indicates expansion for the 11th straight month. The official PMI samples 3,000 manufacturing enterprises in China.
The Caixin PMI samples some 500 manufacturers and is relatively volatile due to its small sample size and less involvement of large enterprises.
The pick-up in the Caixin PMI reading was supported by stronger production and new orders, prompting companies to increase their purchasing activity slightly, even as muted client demand led manufacturers to reduce their inventory holdings and trim employment.
Caixin said faster growth in new order books helped lift the headline manufacturing PMI. Though marginal, the latest increase in new orders was the quickest seen for three months. The new export orders index also picked up slightly. However, subdued customer demand weighed on optimism towards the 12-month business outlook, with confidence edging down to a six-month low in June.
Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, said the manufacturing sector recovered slightly in June, but based on the inventory trends and confidence around future output, an economic downtrend is likely to be confirmed later.
China’s economy grew 6.9 percent in the first quarter of the year, up from 6.8 percent the previous quarter and well above the government’s annual target of around 6.5 percent set for 2017.
It’s widely expected growth may be moderate for the rest of the year, but a steep decline is not likely, due to a buttressing effect from reforms and burgeoning new growth drivers.
The Chinese Academy of Social Sciences, a government think tank, expects the economy to grow 6.7 percent, 6.6 percent and 6.5 percent in the second, third and fourth quarters, respectively.