China's official manufacturing and non-manufacturing PMIs both declined in July
AI summary card
China's official manufacturing and non-manufacturing PMIs both declined in July
Goldman Sachs noted that China's NBS manufacturing PMI fell to 49.2 in July and the non-manufacturing PMI fell to 49.0, indicating a slowdown in manufacturing, services, and construction activity.
- The manufacturing PMI fell from 50.3 in June to 49.2 in July, below Goldman Sachs' forecast of 49.9 and the Bloomberg consensus of 50.1.
- The non-manufacturing PMI fell from 50.2 to 49.0, with the services PMI declining to 49.3 and the construction PMI to 47.0.
- Manufacturing new orders and production subindices declined most notably, while new export orders and imports also fell.
- The input price index remained above 50, but the output price index stayed below 50, indicating continued pressure on manufacturing profit margins.
Report interpretation
Overview
This report reviews China's official NBS PMI data for July. Both the manufacturing and non-manufacturing PMIs fell below the expansion-contraction threshold, pointing to a broad-based slowdown in manufacturing, services, and construction activity. Within manufacturing, new orders and production weakened and trade-related subindices declined; within non-manufacturing, both services and construction fell, with construction activity weighed down by high temperatures, heavy rainfall, flooding, and other adverse weather conditions.
Core views
The core view is that the July PMI data weakened significantly from June and came in below both Goldman Sachs' forecast and the market consensus. Manufacturing demand and production cooled simultaneously, while export orders and imports declined. In non-manufacturing, the summer season supported air transportation, accommodation, and culture, sports, and entertainment, but wholesale, monetary and financial services, capital market services, and real estate services remained weak. On prices, input prices continued to expand while output prices contracted, indicating continued pressure on corporate profit margins.
Analysis framework
The report uses a monthly high-frequency macroeconomic tracking approach, comparing the July official NBS manufacturing and non-manufacturing PMIs with June readings, Goldman Sachs' forecasts, and the Bloomberg consensus, and further decomposing new orders, production, employment, supplier delivery times, imports and exports, inventories, enterprise size, input prices, factory-gate prices, services, and construction subindices.
Methodology notes
Using 50 as the dividing line between expansion and contraction to observe changes in headline and subindices.
Manufacturing and non-manufacturing PMIs below 50 generally indicate that the relevant economic activities are in contraction; changes in subindices help assess the marginal direction of demand, production, prices, and employment.
Used to measure the relevance of macroeconomic data to growth and the degree of surprise relative to consensus.
The report gives an Asia-MAP score of -9 for the official manufacturing PMI, with a growth relevance score of 3/5 and a consensus surprise of -3, indicating moderate relevance to growth and a result below market expectations.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- China's macroeconomyThe PMI is an important high-frequency indicator for assessing short-term economic activity.
- Strengths
- New orders and production subindices in some industries, such as general equipment, computers, communications, and other electronic equipment, remained above 53.
- Weaknesses
- Manufacturing, services, and construction PMIs all fell below 50, indicating an overall slowdown in activity.
- Comparison
- The main July PMI readings were all below their June levels and below Goldman Sachs' forecasts and the Bloomberg consensus.
- Risks
- If demand and price subindices continue to weaken, pressure on growth and corporate earnings may persist.
- ManufacturingThe report focuses on the manufacturing PMI and its order, production, trade, and price subindices.
- Strengths
- The employment subindex rose from 48.5 to 49.0, while subindices for some high-end equipment and electronic equipment industries remained relatively strong.
- Weaknesses
- New orders, production, new export orders, imports, and price subindices all declined.
- Comparison
- PMIs for large, medium-sized, and small enterprises fell from 50.7/50.5/48.2 to 49.5/49.7/47.4, respectively.
- Risks
- Activity weakened in industries including non-metallic mineral products, ferrous metal smelting and rolling, and automobiles.
- Non-manufacturingThe non-manufacturing PMI reflects services and construction activity.
- Strengths
- The summer season supported PMIs in air transportation, accommodation, and cultural, sports, and entertainment industries.
- Weaknesses
- The services PMI fell to 49.3 and the construction PMI to 47.0.
- Comparison
- The non-manufacturing PMI fell from 50.2 in June to 49.0 in July.
- Risks
- Weakness in wholesale, monetary and financial services, capital market services, and real estate services, together with adverse weather, weighed on construction activity.
Key data
- NBS manufacturing PMI49.2July reading; June was 50.3, Goldman Sachs' forecast was 49.9, and the Bloomberg consensus was 50.1.
- Official non-manufacturing PMI49.0July reading; June was 50.2, Goldman Sachs' forecast was 49.6, and the Bloomberg consensus was 50.0.
- Manufacturing new orders subindex48.5June was 51.2; this was the sharpest decline among the major subindices.
- Manufacturing production subindex49.9June was 51.4, indicating weaker production activity.
- Services PMI49.3June was 50.4; declines in wholesale and monetary and financial services were the main drags.
- Construction PMI47.0June was 49.0, a relatively low level compared with its historical average.
- New export orders subindex49.6June was 50.1, indicating marginal weakening in trade-related demand.
- Imports subindex47.5June was 49.6, representing a relatively large decline.
- Input cost subindex53.2June was 54.2; it remained above 50 but declined.
- Output price subindex47.8June was 48.2; this marked the fourth consecutive monthly decline.
Impact & implications
The July PMI data indicate weakening momentum in China's economic activity, with manufacturing, services, and construction all below 50, raising near-term growth pressures. Simultaneous weakness in demand and production, together with output prices below 50, could continue to weigh on corporate profit margins; weak construction and subdued real estate-related services also suggest that domestic demand and the property chain require continued monitoring.
Risks
- The decline in manufacturing new orders and production subindices points to slowing demand and output momentum.
- The decline in new export orders and imports indicates weakening trade-related activity.
- With output prices below 50 while input prices remain above 50, corporate profit margins may remain under pressure.
- Construction activity remained weak, affected by high temperatures, heavy rainfall, flooding, and other adverse weather conditions.
- Capital market services and real estate services PMIs remained below 50, indicating continued pressure in related services.
What to watch
- Whether the subsequent NBS manufacturing and non-manufacturing PMIs return above 50.
- The recovery in new orders, production, new export orders, and imports subindices.
- Whether the gap between input costs and output prices continues to pressure profit margins.
- Changes in business conditions in wholesale, financial, capital market, and real estate services.
- Whether construction improves after weather-related disruptions ease.