China's June factory activity records faster expansion, shows steady recovery
Updated 07:44, 01-Jul-2020

China's June factory activity expanded faster than last month, beating expectations and indicating a steady economic recovery from the coronavirus shock.

The purchasing managers' index (PMI) for China's manufacturing sector climbed to 50.9 in June from 50.6 in May, the best reading in three months, the National Bureau of Statistics (NBS) data showed on Tuesday. That beats Bloomberg expectation of 50.5 and Reuters forecast of 50.4.

A PMI above 50 indicates expansion, while one below 50 indicates contraction.

The production index and the new orders index reached 53.9 and 51.4, respectively, up 0.7 and 0.5 percentage points from the previous month, as supply and demand continued to pick up.

"The new orders index rebounded for two consecutive months," said NBS senior statistician Zhao Qinghe.

He added that in terms of industry, the manufacturing new orders index and production index of medicine, nonferrous metals, general equipment and electrical machinery have seen a significant improvement compared to last month, indicating a recovery in market demand.

As major global economies reopen, China's manufacturing import and export index has rebounded from a low level in June, said Zhao.

He specified that the new export orders index climbed by 7.3 percentage points, reaching 42.6 percent. Several manufacturing industries, including petroleum processing and electrical machinery, rebounded by more than 10 percentage points.

In light of the recovery, Zhao noted that many manufacturers are still struggling as global demand remains uncertain.

"Small enterprises have greater difficulties in production and operation, with a PMI recorded at 48.9, a decrease of 1.9 percentage points from the previous month. The proportion of small enterprises claiming insufficient orders is higher than that of large and medium-sized enterprises," he specified.

Activity in China's services sector expanded for a fourth consecutive month, NBS data showed, suggesting a rapid recovery in consumer confidence.

Nomura analysts in a note attributed the growth in June to a gradual recovery in the services sector and robust online sales.

"Company data suggest online retail sales, which account for 20 percent of total retail sales, have been quite solid in June," it wrote, underlining that e-commerce giant reported a transaction volume of 269.2 billion yuan during its shopping festival between June 1 and 18.

Some sectors performed well, such as transportation since more people start to travel for business again and the dragon-boat festival helped boosted tourism, telecommunications as people spend more time on their phones for news, online shopping and entertainment, as well as finance since many small companies try to borrow money to survive this period.

The financial industry, information technology sector and transportation all saw increased business volume with a business activity index above 59. The construction sector business activity index landed above 59 for the third consecutive month.

While sectors that involve crowds were still in contraction, such as sports, entertainment and after-school education centers for kids. Many gyms, swimming pools, movie theatres and kids centers are still shut around the country. That indicates a long way to go before the economy fully recovers back from the coronavirus lockdowns.

Non-manufacturing PMI rose to 54.4 from 53.6 in May. The composite PMI, which includes both manufacturing and services activity, rose to 54.2 in June from last month's 53.4.

The PMI is a sentiment gauge, conducted through a survey of factory owners and purchasing managers. It offers an early snapshot of the state of the economy during the month ahead, quizzing operators on issues like hiring, export orders and inventory.

(CGTN's Zheng Junfeng also contributed to the story.)