China’s July factory activity grows at a slow pace – Caixin PMI

BEIJING, Aug 1 (Reuters) – China’s factory activity slowed in July as the pace of growth in production, new orders and jobs softened, a private sector survey showed on Monday.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) declined to 50.4 in July, from 51.7 in the previous month. The reading was well below analysts’ expectations for a slight decline to 51.5.

The 50-point index separates growth from contraction on a monthly basis.

China’s major manufacturing hubs, including commercial hub Shanghai, saw a solid rebound from widespread COVID lockdowns in the spring in June, but the recovery has begun amid a prolonged asset breakout with the fresh virus flare-up and weakening domestic and global demand. market downturn.

The findings were slightly better than the government’s official PMI on Sunday, which unexpectedly contracted China’s factory activity in July. The Caixin survey is believed to focus more on smaller, export-oriented companies.

A sub-index for output indicated a second monthly increase, but was significantly slower than in June.

Growth in new orders – domestic and exports – also softened on lower demand and the lingering impact of COVID-19 on customer spending.

Due to the recent COVID outbreak and shortage of stock and staff with the suppliers, the time taken for the inputs procured to reach the manufacturers increased in July.

Meanwhile, an index for employment in Chinese manufacturers fell for the fourth straight month and hit the lowest level in 27 months, reflecting continued labor market weakness. The companies blamed the staff crunch for cost-cutting, reduced sales and non-replacement of voluntary levers.

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“The improvement in supply and demand failed to spread to the labor market for manufacturing, which continued to shrink,” said Wang Zhe, senior economist at Caixin Insight Group.

“Low-cost companies were cautious about expanding their workforce due to sluggish market demand,” Wang said.

On a brighter note, companies’ input costs rose only marginally when prices continued to rise, reducing profit margins. However, due to soft demand, they had to cut their selling prices for the third consecutive month.

China’s economy slowed sharply in the second quarter, highlighting the heavy toll on activity from widespread COVID lockdowns, which jolted industrial production and consumer spending.

State media reported after a Politburo meeting this week that policymakers have reaffirmed their zero-Covid stance and are set to miss their GDP growth target for this year of “about 5.5%” . Instead the authorities will focus on achieving the best results this year, contrary to previous calls that it will work hard to meet the 2022 growth target.

Emphasizing the third quarter will be a critical period for getting the economy back on track, Wang did not expect massive stimulus measures.

“Effective implementation of existing policies is a more practical option.”

(Reporting by Ellen Zhang and Ryan Woo; Editing by Kim Coghill)

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