China's services, manufacturing activity rebounds in June

Activity in China’s manufacturing and services sectors rebounded in June as Covid restrictions were eased in Shanghai, according to figures released on Thursday by the National Bureau of Statistics.

The official manufacturing purchasing managers’ index rose to 50.2 in June from 49.6 in May, coming in just below consensus expectations for a reading of 50.5 and marking the best level since February.

A sub-index for production came in at 52.8, up from 49.7 in May, while the new orders index rose to 50.4 from 48.2.

Meanwhile, the non-manufacturing PMI ticked up to 54.7 in June from 47.8 the month before, versus consensus expectations of 50.5.

Zhu Hong, senior statistician at the NBS, said: "Even though the manufacturing sector continued to recover this month, 49.3% of the companies reported orders were insufficient.

"Soft market demand is still the main problem facing the manufacturing industry."

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "None of the economists surveyed by Bloomberg, ourselves included, expected such a strong print for the non-manufacturing PMI in June.

"For our part, we had expected a rise for the services subcomponent to be partly offset by a weaker construction number, given the problems facing the property sector. In the end, both gained, and by more than anticipated in the case of services. The service business activities index jumped to 54.3, from 47.1, while construction rose to 56.6, from 52.2.

"This bodes well for retail sales - though on a y/y basis they will likely remain in negative territory - and for infrastructure FAI, with local governments under orders to accelerate bond issuance and project delivery. We think it is unlikely that property investment had a strong month, given the continued revenue pressures facing developers."

He added: "We don’t think these surveys are strong enough to save Q2 from negative GDP growth, q/q, but they point to a quick recovery from lockdown, and minimal disruption to global supply chains, with inflationary pressures still falling, overall."