July factory PMI missed forecasts at 49.2, weakest since February. The export rush that powered China's Q2 rebound is fading, pressuring Beijing to act.
China's factory activity contracted in July. The official purchasing managers' index fell to 49.2 from 50.3 in June, National Bureau of Statistics data showed Friday, missing economists' median forecast of 50.0. The reading snapped four straight months of expansion and was the weakest since February.
A day before the release, top policymakers acknowledged "difficulties and challenges facing the economy" at their mid-year meeting, pledging to accelerate fiscal spending. They said they would roll out "incremental policies" to support growth in the second half.
Second-quarter gross domestic product expanded 4.3% from a year earlier, the slowest pace in more than three years and below the lower end of the full-year target range of 4.5% to 5%.
Exports powered much of the rebound this year. In the July survey, U.S.-bound shipments "fell outright for the first time in several months," according to China Beige Book. The research firm found factory activity decelerated in July. Employment was the worst-performing subcomponent, and job growth deteriorated across all sectors it tracks from a year earlier.
In June, shipments to the U.S. rose 14% and overall exports surged 27%, the fastest pace in nearly five years. Businesses had frontloaded orders ahead of expected higher American tariffs. Manufacturers braced for additional levies from Section 301 probes after the 10% broad-based duty expired on July 24.
Retail sales fell in July from both the prior month and a year earlier, China Beige Book found. Travel and restaurants saw a sharp on-year downturn.
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