China's June Manufacturing PMI at 49.5... 'Economic Contraction' for Second Consecutive Month

The manufacturing Purchasing Managers' Index (PMI), which indicates China's economic trend, remained below 50 for the second consecutive month, signaling an 'economic contraction.'

On the 30th, China's National Bureau of Statistics announced that the manufacturing PMI for June this year was 49.5, the same as the previous month. A PMI above 50 indicates economic expansion, while below 50 indicates economic contraction.

Beijing Tiananmen, China (Photo by Yonhap News)

China's manufacturing PMI showed economic contraction for five consecutive months: 49.5 (October 2023) → 49.4 (November) → 49.0 (December) → 49.2 (January 2024) → 49.1 (February). In March, it recorded 50.8, entering an economic expansion phase for the first time in half a year, and maintained above 50 at 50.4 in April.

However, in May it recorded 49.5 and appears to have entered an economic contraction phase again for two consecutive months.

By company size, the PMI for large enterprises in June was 50.1, exceeding the baseline but down 0.6 from the previous month. The PMI for medium-sized enterprises (49.8, up 0.4 from the previous month) and small enterprises (47.4, up 0.7 from the previous month) remained below the baseline.

Among the five major indices that make up the manufacturing PMI, four declined, with only the production index (50.6, down 0.2 from the previous month) exceeding the baseline.

The National Bureau of Statistics explained that production indices for sectors such as metal products and railway, shipbuilding, aviation, and aerospace equipment exceeded 55, but industries like textiles and petroleum and coal processing were below the critical point. Regarding the low new orders index in sectors such as chemical raw materials and chemical products, and non-metallic mineral products, it added, "Lack of effective demand is the main difficulty currently faced by companies."

The non-manufacturing PMI for China in June was 50.5, down 0.6 from the previous month. The non-manufacturing PMI measures activities in construction and service industries. Although the non-manufacturing PMI, which rose to 53 in March, has been declining since April, it still remains above the baseline, maintaining an economic expansion phase.

Meanwhile, China set its economic growth target for this year at around 5%, the same as last year. The International Monetary Fund (IMF) also revised up its forecast for China's economic growth rate this year from 4.6% to 5.0% on the 29th of last month.