China's July Manufacturing PMI at 49.3... Fourth Consecutive Month of Contraction

China's Manufacturing Purchasing Managers' Index (PMI) remained in contraction territory for the fourth consecutive month. This trend is attributed to weather conditions such as heatwaves and floods, as well as the impact of U.S. tariffs on Chinese goods.

On July 31, China's National Bureau of Statistics announced that the manufacturing PMI for July was recorded at 49.3, a decrease of 0.4 points from the previous month (49.7).

A steel factory in Jiangsu Province, China. Photo by AFP

This figure fell short of market expectations from Bloomberg and Reuters (49.7) and marks the lowest level since April.

The PMI, which is based on surveys of corporate purchasing managers, serves as an indicator of economic trends in the relevant sector. A reading above 50 indicates economic expansion, while a reading below 50 signals contraction.

The non-manufacturing PMI, which consists of the construction and service sectors, was 50.1 in July, down 0.4 points from the previous month (50.5).

By sector, the construction business activity index dropped by 2.2 points to 50.6 from the previous month's 52.8, while the service business activity index declined by 0.1 points to 50.0 from 50.1 in the previous month.

The composite PMI, which combines manufacturing and non-manufacturing sectors, stood at 50.2 in July, down 0.5 points from the previous month (50.7).

Zhao Qinghe, Senior Statistician at the Service Industry Survey Center of China's National Bureau of Statistics, explained, "In July, the manufacturing sector entered its traditional off-season, and disasters such as heatwaves, heavy rains, and floods occurred in some regions, resulting in a deterioration of manufacturing activity compared to the previous month."

Cameron Johnson, Senior Partner at consulting firm Tidalwave Solutions, stated, "The reason for the low PMI is due to weather issues and the relocation of some orders to countries with lower tariffs such as Vietnam." He predicted that some production would continue to shift to countries with lower tariffs until the U.S. and China reach a tariff agreement.

Bloomberg pointed out that while China achieved an economic growth rate of 5.3% in the first half of this year, surpassing its target (around 5%), concerns about an economic slowdown are growing in the second half.