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China Factory PMI Ticks Up, Export Support Seen Temporary
China's manufacturing PMI rose to 50.3 in June, driven by export orders. That support may fade after oil retreats and domestic demand remains weak. Implications for the yuan.
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China's factory activity edged higher in June, with the official manufacturing PMI rising to 50.3 from 50.0, slightly above the 50.2 consensus. The non-manufacturing PMI came in at 50.2, beating the 49.9 forecast, while the composite index ticked up to 50.6 from 50.5.
Export orders drove the manufacturing improvement. Overseas buyers accelerated purchases during the Middle East conflict and the earlier oil-price spike, the NBS data showed. That urgency has since faded. The US and Iran reached a peace agreement in late June, and crude prices have fallen back to pre-conflict levels. The front-loading effect is likely to unwind in coming months, reducing one source of support for Chinese factories, economists said. The PMI survey period may have captured the tail end of that rush, not the unwinding.
Separate industrial profit data released over the weekend reinforced the uneven picture. Upstream industries, along with sectors tied to artificial intelligence and renewable energy, posted gains. Downstream manufacturers reported pressure from weak domestic demand. Household consumption has not yet picked up, according to the profit figures.