China’s private manufacturing sector remained in expansion territory for an eighth consecutive month in July, although growth moderated from June. The RatingDog China General Manufacturing PMI eased to 50.9 from 51.7, the lowest reading in four months, but still signaled improving operating conditions. The current expansion matches the longest stretch of manufacturing growth in five years, with all five PMI components contributing positively for a second straight month.
The slowdown reflected softer growth across several key indicators rather than a reversal in activity. Total new orders continued to rise for a fourteenth consecutive month—the longest expansion since 2018—though the pace eased. Manufacturing output also expanded for an eighth straight month at a slower rate, while new export orders returned to growth after two months of contraction, providing a positive signal for external demand. Employment increased for a second consecutive month, although hiring remained modest.
Inflation pressures continued to ease, offering manufacturers some relief. Input cost inflation slowed to a six-month low, while firms largely kept selling prices unchanged despite higher costs. The survey also pointed to a mixed inventory picture, with companies continuing to build input stocks while reducing purchasing activity for the first time since November 2025, suggesting earlier inventory accumulation may be sufficient for near-term production needs. Looking ahead, business confidence improved slightly on expectations of stronger demand, new product launches and capacity expansion, although RatingDog expects manufacturing growth to remain positive but moderate in the coming months.
Economic Data
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| Manufacturing PMI | 50.9 | — | 51.7 |
| New Orders | Expanded (14th consecutive month) | — | Expanded |
| New Export Orders | Returned to expansion | — | Contracted |
| Manufacturing Output | Expanded (8th consecutive month) | — | Expanded |
| Employment | Modest increase | — | Increased |
| Input Cost Inflation | Six-month low | — | Higher |
| Output Prices | Broadly unchanged | — | Increased marginally |
Market Takeaways
- Manufacturing PMI eased from 51.7 to 50.9, marking a four-month low but remaining above the 50 threshold for an eighth consecutive month, matching the longest expansion in five years.
- Domestic demand remained resilient, with total new orders rising for a fourteenth straight month—the longest growth streak since 2018.
- New export orders returned to expansion after two months of contraction, suggesting external demand improved at the start of the third quarter.
- Cost pressures continued to ease, with input price inflation slowing to a six-month low while firms largely kept selling prices unchanged.
- Inventory dynamics were mixed. Companies continued to build input stocks for an eighth consecutive month but reduced purchasing activity for the first time since November 2025, indicating existing inventories were sufficient to support near-term production.
- Business confidence strengthened slightly as firms anticipated firmer demand, new product launches and expanded production capacity in the year ahead.
