China: Chinese manufacturing activity slowed from an eight-month high in June, official data showed—falling below expectations for the world’s second largest economy in face of a trade war with the US.
According to the National Bureau of Statistics (NBS), the Purchasing Managers’ Index—key gauge of manufacturing conditions—was at 51.5 in June, a dip from 51.9 in May. The figure was lower than the 51.6 expected in a Bloomberg News survey of economists.
While numbers indicate a slowdown, they maintain a comfortable over-50-point mark that distinguishes expansion from contraction and were higher than NBS’s average reading of 51.3 for first half of 2018.
“The manufacturing industry’s fundamentals are on the whole trending positive. Manufacturing and demand are expanding at an overall steady pace,” said Zhao Qinghe, NBS analyst, in a statement.
Amidst expansion of large-scale businesses in June, small- and medium-sized enterprises experienced contraction in the same period, Zhao noted—both falling below the 50-point mark. Activity has fallen 0.2 to 49.8 and 1.1 to 49.9 points for small- and medium-sized enterprises respectively.
On 24 June, China’s central bank announced that it would decrease reserve requirement ratio for most banks in a bid to grant funding for small firms. The effort, however, might not reap results.
A research note by Capital Economics cited: “Looking ahead, we see increasing headwinds to the economy in the second half of the year from slowing credit growth.” It added that the risk of a China-US trade war is “adding to the uncertainty”.