August8 , 2022

China’s factory, service sectors expand in June as recovery quickens

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Employees work on the production line at a factory of Beijing Benz Automotive Co., Beijing, China, February 17, 2022. /Reuters

Employees work on the production line at a factory of Beijing Benz Automotive Co., Beijing, China, February 17, 2022. /Reuters

China’s economic recovery gathered pace in June as the factory and the service sector expanded, official data showed on Thursday.

The June composite PMI, measuring both manufacturing and services activity, rose to 54.1 compared with 48.4 in the previous month, data from the National Bureau of Statistics (NBS) showed.

China’s manufacturing purchasing managers’ index (PMI) rose to 50.2 in June as production recovered and logistics improved. It slightly missed Reuter’s forecast at 50.5.

A PMI register above 50 indicates expansion in business activity. The manufacturing sector has reversed from a three-month contraction as the new order delivery time was slashed.

Measures in guaranteeing the smooth operation in the logistics sector have been effective in cutting suppliers’ delivery time to support the production and operation of enterprises, said Zhao Qinghe, a senior NBS statistician.

The production index and new order index came at 52.8 and 50.4, respectively, 3.1 and 2.2 percentage points higher than in May, while the supplier delivery time index was 51.3, a monthly increase of 7.2 percentage points, the NBS data showed.

Zhao cautioned that despite the recovery trend, soft market demand still haunts the manufacturing industry and squeezed profit margins still weigh on enterprises.

Service sector rebounds swiftly

China’s service segment rebounded significantly for two consecutive months, NBS data showed.

The non-manufacturing PMI rose to 54.7 in June, 6.9 percentage points higher than the previous month as COVID-19 containment measures eased.

A waiter serves dishes at a restaurant in Shanghai on the day the city resumes restaurant dine-in service, June 29, 2022. /CFP

A waiter serves dishes at a restaurant in Shanghai on the day the city resumes restaurant dine-in service, June 29, 2022. /CFP

“With the impact of the pandemic phases out, market demand in the service industry warmed up, and business confidence is gradually recovering,” said Zhao.

In terms of market demand and expectations, the new order index and business activity expectation index were 53.7 and 61.0, respectively, up 10.0 and 5.8 percentage points from the previous month.

The new order index is higher than the same period over the last three years, indicating that the sector is recovering faster, said Cai Jin, vice president of the China Federation of Logistics and Purchasing. He added that the business activity expectation index reached a record high for the year.

COVID-19 cases have dropped across China and many regions have eased the closed-off management to contain a new wave of the outbreak. Shanghai has gradually restored the normal order of production and life across the city since June 1.

China’s economic planning agency said on Tuesday that the country can cope with unexpected risks this year to achieve its GDP growth target of around 5.5 percent.

The country unveiled a detailed policy package in May to prop up the economy. The package covers six areas, including fiscal, consumption and supply chain, with a total of 33 measures.

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