The manufacturing PMI stayed below 50 for a second straight month in June as demand softened. Real activity growth likely edged down partly due to base effects; export growth may have stayed strong, Standard Chartered Global Research analysts Hunter Chan and Shuang Ding note.

Production remained robust amid weak demand

“China’s official manufacturing PMI stood at 49.5 in June, staying in contractionary territory for a second month. That said, production activity remained resilient. The average production PMI picked up 0.3pt from Q1 to 51.4 in Q2. Meanwhile, the average new orders PMI fell 0.2pts to 50.1.”

“Industrial production (IP), retail sales and fixed asset investment (FAI) growth likely edged down in June versus May, partly due to base effects. External demand may have remained resilient, supporting production activity. The consumer goods trade-in programme likely supported retail sales of home appliances.”

“PPI deflation likely eased further to 0.5% y/y in June due to a low base, while CPI inflation may have inched up to 0.4% y/y. We believe M2 and credit growth slowed further amid weak credit demand, and enhanced regulatory and statistical measures.”