China’s July factory activity growth slips to 15-month low

Reuters reports that a Caixin/Markit business survey showed that China’s factory activity growth slipped sharply in July as demand contracted for the first time in over a year in part on high product prices.

The Purchasing Managers’ Index (PMI) fell to 50.3 last month from 51.3 the month before, the lowest level since April 2020. Analysts had expected the index to ease to 51.1.

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.

A sub-index for new orders slipped sharply into contraction for the first time since May 2020, while another sub-index for production fell to the slowest pace of expansion since March last year.

Input prices continued to rise, albeit at a slower pace than the previous month but much faster than output prices, putting pressure on margins. Export orders grew slightly faster than the month before but still at a slow pace as the pandemic dampened overseas demand. Factories hired more workers for the fourth month in a row but at a slower pace. An index of confidence in the year ahead slipped to the lowest level in 15 months.