China's manufacturing Purchasing Managers' Index (PMI) has been in a contraction phase for four consecutive months. This is interpreted as a sign that the previously surging exports ahead of the U.S. tariff increases are beginning to slow down amid ongoing domestic sluggishness.
China's National Bureau of Statistics announced on the 31st that the manufacturing PMI for July was recorded at 49.3. This marks a decrease of 0.4 points from the previous month and fell short of the market expectation of 49.7 surveyed by Reuters. This is the lowest level since April of this year. The manufacturing PMI, which shows the economic trend in China, indicates expansion when it exceeds 50 and contraction when it falls below 50.
The non-manufacturing PMI, including construction and services, dropped 0.4 points from the previous month to 50.1. It also fell short of the market expectation of 50.2. The composite PMI, which includes both manufacturing and non-manufacturing, barely maintained an expansion trend with a decline of 0.5 points from the previous month to 50.2.
The National Bureau of Statistics attributed the decline in the manufacturing PMI in July to the traditional off-season and manufacturing stoppages caused by heatwaves and heavy rains.
Foreign media outlets, including Reuters, pointed to sluggish exports as the reason for the poor PMI performance. Analysts suggest that exports, which had briefly surged due to concerns over high tariffs imposed by the U.S. on China, have quieted down again. According to Bloomberg, the cargo throughput at major Chinese ports in the past week recorded the lowest level in approximately three months, showing a reduction of about 7% compared to the previous week. This suggests that external trade may once again shift into a slowdown mode.
Against this backdrop, the Chinese Communist Party emphasized the resilience of its economy and issued an optimistic message during a Politburo meeting held the day before. China recorded its largest-ever trade surplus in the first half of the year, thanks to increases in exports to Southeast Asian countries and stability in exports to the U.S.
However, dark clouds are looming over China's economic recovery. Bloomberg noted, "Deflationary pressure from weakened consumption remains a concern," and added, "A recent survey conducted by the Central Bank revealed that household economic outlook has deteriorated compared to the previous quarter, and expectations for the job market have fallen to their lowest level on record."
It continued, "In the first half of the year, growth was stronger than expected, but anxiety regarding economic slowdown in the second half is growing," noting that "even though it exceeds the annual growth target of 5% set by the Chinese government, concerns that weakened consumer sentiment and job instability could hinder the economy are arising."