A private survey shows China’s manufacturing activity beat expectations in June

Results of a private survey released on Wednesday showed China’s manufacturing activity expanded and beat expectations in June, hitting its highest level since December 2019.

The Caixin/Markit manufacturing Purchasing Manager’s Index came in at 51.2. Economists polled by Reuters were expecting 50.5, as compared to 50.7 in May.

PMI readings above 50 indicate expansion, while those below that level signal contraction. The monthly PMI readings are sequential.

“The manufacturing sector continued to expand, as most of the country had the epidemic under control and the economy continued to recover,” said Wang Zhe, senior economist at Caixin Insight Group in a press release.

While overall manufacturing demand recovered at a fast clip, overseas demand remained a drag, Wang wrote.

“New export orders continued to fall amid weak external demand, as the epidemic situation overseas remained uncertain in many places and the number of new daily infections remained high,” he said.

But overall demand “improved remarkably” he noted. The subindex for total new orders expanded for the first time since January, as gradual lifting of epidemic control measures allowed production to resume.

Even though supply and demand both improved in June, the employment subindex remained in negative territory for the sixth straight month, and was even weaker than in May.

“Manufacturers remained cautious about increasing hiring,” said Wang.

China on Tuesday said manufacturing activity expanded in June with the official PMI coming in at 50.9, but the country’s statistics bureau said there still are headwinds caused by the economic fallout from the coronavirus pandemic.

Capital Economics said the results of two surveys support the view that China’s GDP growth likely turned positive from a year ago in the second quarter.

“We continue to anticipate a stronger recovery in the coming quarters than the analyst consensus,” said Martin Rasmussen, a China economist at the research firm.

The gauge for new export orders in the Caixin/Markit survey also improved and shows that export growth is stabilizing.

“One explanation is that the Caixin survey is skewed more towards private firms, who tend to be overrepresented in sectors such as textiles (including masks), electronics and medical products, sectors which have benefitted from strong demand for COVID-related products in recent months,” wrote Rasmussen in a note after the release of the survey results.

The private Caixin/Markit survey features a bigger mix of small- and medium-sized firms. In comparison, the official PMI survey typically polls a large proportion of big businesses and state-owned companies.