- In June 2024, the PMI held steady at 49.5 percent, slightly below the critical 50 percent threshold, indicating a slight contraction in the manufacturing sector. Due to the Spring festival, for the first two months of the year, China’s PMI remained low. This was followed by a period of growth in March and April, giving way to another decline in May and June.
- Specifically, in June, indices related to order purchasing and inventory sales declined, In addition, the production purchasing price index also fell, suggesting a generally weakening manufacturing activity.
- From the supply and demand perspective, while the June production index was 50.6 percent, a slight decrease of 0.2 percentage points from the previous month, it still indicates modest growth. However, the expansion rate is marginal and continues to shrink.
- Meanwhile, on the demand side, the new orders index fell slightly by 0.1 percentage point to 49.5 percent, signaling significant pressure on future orders and continued weak demand. This imbalance could lead to a build-up of inventories, which may cause manufacturers to adjust production downward if demand does not improve.
- Based on this data, the upcoming Consumer Price Index (CPI) is expected to remain low. The broader domestic macroeconomic environment is likely to remain characterized by deflationary expectations and slowed economic activity. Most industries are unlikely to expand in the near future, which could further increase employment pressures.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.