China manufacturing slows in July to 15-month low amid weak exports

The monthly purchasing managers’ index decreased to 50.3, down from 51.3 in June

China’s manufacturing growth eased in July to a 15-month low while demand for exports slowed down as factories struggled to cope with supply issues, according to the China General Manufacturing PMI.

The monthly purchasing managers’ index decreased to 50.3, down from 51.3 in June, with anything above 50 showing activity increasing.

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Compared to other countries, China recovered speedily from the pandemic, however, manufacturers have struggled as they wait for supply chains to get back to the levels seen before the pandemic.

In addition, foreign export markets are struggling as new variants of Covid continue to keep their respective recoveries in check.

New export orders rose only slightly as the pandemic continued to hinder sales overseas.

”The Chinese economy has largely recovered from disruptions caused by the coronavirus pandemic, but it has faced new challenges in recent months such as higher raw material costs, which dragged on profit growth at industrial firms in June,” the report said.

Supply chain delays persisted in July, with average delivery times for inputs increasing solidly. Anecdotal evidence indicated that material shortages and transport delays due to the pandemic had driven the latest increase in lead times.

Capacity pressures eased at the start of the third quarter, with backlogs of work rising at the softest pace for five months. Employment levels meanwhile were little-changed in July, after a slight uptick in payroll numbers in June.

Commenting on the China General Manufacturing PMITM data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Manufacturing PMI came in at 50.3 in July, down from 51.3 the previous month. The July reading was the lowest in 15 months, though it marked the 15th consecutive month of expansion. That meant while the manufacturing industry continued to grow, the rate of expansion slowed further.”

Zhe added that inflationary pressure eased slightly.

“Both the gauges for input prices and output prices fell in July, with the latter dropping at a steeper pace. Still, the gauge for input prices was well above 50, as surveyed enterprises said raw material prices remained high, especially for industrial metals. Notably, the gauge for input prices remained above 55 for the eighth consecutive month in July.”

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