China factory PMI edges up in June, growth in services slows

China factory activity continued to be muted in June as demand remained weak, although levels of output did rise, the results of a closely-followed survey revealed.

The National Bureau of Statistics's factory sector Purchasing Managers' Index edged up from 48.8 in May to 49.0, just as expected.

Nevertheless, readings below 50 points continued to indicate a contraction in levels of activity overall.

A sub-index for production improved by 0.7 points to 50.3 - the best reading since March - while that for new orders increased by 0.3 points to 48.6.

The sub-index for export orders meanwhile dropped by 0.8 points to 46.4, the least since January.

"China’s waning manufacturing activity is hitting demand for inputs and raw materials, including from overseas," said Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics.

"This set of below-50 readings supports our view that China will export disinflation, even deflation, to the world this year."

Digging further into the details of the report, Wrigley noted how large enterprises were outperforming small ones by a wide margin.

He also noted that manufacturers remained "somewhat positive" regarding the future, although at 55.9 the sub-index tracking expectations was still beneath ots long-term average since 2013 of 55.9.

Due to the "grim" outlook for the world economy in the second half of 2023, his expectation was that Beijing would provide additional, albeit "restrained", fiscal and quasi-fiscal support to the economy.

A separate PMI for non-manufacturing, mostly services, dipped from 54.5 to 53.2 (consensus: 53.5).

That for services alone slipped by 1.0 point to 52.8.