China’s manufacturing activity expanded at a slightly faster pace in June, with official data pointing to a modest improvement in both factory and services sectors. The NBS PMI Manufacturing rose from 50.0 to 50.3, slightly above expectations of 50.2, while the Non-Manufacturing PMI edged up from 50.1 to 50.2, beating forecasts of 49.9. The Composite PMI also improved from 50.5 to 50.6, indicating the economy continued to expand at a moderate pace.
The improvement in manufacturing was supported primarily by resilient export demand, as overseas buyers accelerated orders amid uncertainty surrounding the Middle East conflict and the earlier surge in oil prices. However, that tailwind may prove temporary. With the US and Iran reaching a peace agreement and oil prices retreating to pre-conflict levels, the urgency to front-load imports is likely to diminish, potentially reducing external support for Chinese manufacturers in the coming months.
Separate industrial profit data released over the weekend underscored the uneven nature of China’s recovery. Profits continued to grow strongly in upstream industries, as well as sectors linked to artificial intelligence and renewable energy, while downstream manufacturers remained under pressure from subdued domestic demand. Together, the latest data suggest exports continue to underpin growth, but a broader and more durable recovery will likely require a stronger improvement in household consumption and domestic spending.
| Indicator | Previous | Latest | Consensus |
|---|---|---|---|
| NBS PMI Manufacturing | 50.0 | 50.3 | 50.2 |
| NBS PMI Non-Manufacturing | 50.1 | 50.2 | 49.9 |
| NBS PMI Composite | 50.5 | 50.6 | — |
