China’s Manufacturing Activity Declines 3 Months In A Row, But New Orders Show Glimmer Of Hope

China’s manufacturing activity contracted for the third straight month in June, government data showed on Monday, as tariff uncertainty and weakness in the property sector weighed.

According to data from the country’s National Bureau of Statistics, the official purchasing managers’ index (PMI) rose marginally to 49.7 compared with 49.5 in the previous month. PMI figure below 50 denotes contraction.

According to a CNBC report, inventory and employment levels at factories stood at 48 and 47.9, respectively, indicating persistent weakness that may prompt Chinese policymakers to issue further stimulus to support an economy still recovering from weakness in its giant property sector.

However, new domestic orders rose to 50.2 from 49.8, and purchasing volumes surged to 50.2 from 47.6, offering signs that domestic consumption may be rebounding after several state incentives aimed at boosting demand.  

China’s exports to the U.S. plunged 34%, the most significant decline since February 2020, at the onset of the COVID-19 pandemic, following President Donald Trump's imposition of tariffs on Chinese exports to the highest levels in a century. However, the two countries have agreed to lower the tariffs to much more palatable levels.  

Data from Monday reportedly showed that the new export orders component of the manufacturing PMI improved significantly to 47.5 from 44.7 in the prior month.

On Friday, China’s commerce ministry confirmed that Beijing had reached an agreement with Washington on further details of the existing trade framework. The ministry noted that it will review and approve export applications for controlled items. In return, the U.S. is expected to lift various restrictions against China.

Retail sentiment on iShares MSCI China ETF (MCHI) on Stocktwits was in the ‘bullish’ territory, while retail chatter was the ‘extremely high.’

The ETF has risen over 19% this year.

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