Private gauge confirms factories strong in June

An employee works on the production line of excavators at a machinery manufacturing plant in Tai'an, Shandong province. (Photo/Xinhua)

A private-sector gauge of manufacturing confirmed China's production activities sustained their solid expansion in June as domestic demand kept rising despite the evolving COVID-19 situation.

And with steady supply matching demand and the job market ever improving, strong drivers of economic recovery in the post COVID-19 era can be anticipated, experts said on Thursday.

The Caixin China General Manufacturing Purchasing Managers' Index came in at 51.3 in June, down from 52 in May, yet firmly above 50, the mark that separates expansion from contraction.

The softening of expansion was mainly caused by some small resurgence of COVID-19 cases and the consequent impediments to supply chains, media group Caixin said in a report on Thursday.

This assessment is consistent with the official purchasing managers index for China's manufacturing sector issued by the National Bureau of Statistics on Wednesday, which came in at 50.9 in June, marginally down from 51 in May.

Meanwhile, for the third month in a row, businesses in the manufacturing sector continued to add new jobs in June. Also, with new businesses growing, factories plan to expand their production capacity.

As growth in purchasing activities signaled a bit of a slowdown in June, businesses voiced a view that due to suppliers' stock shortages and crimped logistics, supply chains are facing certain challenges, the Caixin report said.

In a separate note on Wednesday, Lu Ting, Nomura's chief China economist, said the moderation in June was led mainly by the production sub-index, which fell to 51.9 in June from 52.7 in May, according to NBS data.

Yet, despite the sequential moderation in June from May, PMI prints were still solid in the second quarter, pointing to the resilience of China's economy, Lu said.

Despite the evolving COVID-19 situation and its potential adverse impact on the economy, manufacturing has expanded steadily, said Wang Zhe, a senior economist at Caixin Insight Group.

Noting that the recent rapid rise in commodity prices has been curbed, Wang said the raft of policies and measures by the authorities concerned have proven effective.

Meanwhile, as last year's base effect will continue to soften in the months to come, intertwined pressure on growth and inflation will be worth noticing in the second half of this year.