China’s manufacturing boom continued to rise in June, supply and demand maintained expansion, but due to concerns about intensifying competition and weaker market conditions, manufacturing entrepreneurs’ optimism significantly decreased.

June 2024 Caixin China Manufacturing purchasing Managers’ Index (PMI) released on July 1 recorded 51.8, up 0.1 percentage points from May, above the line of growth and contraction for eight consecutive months, the highest since June 2021, indicating that the expansion of manufacturing production and operating activities accelerated.

FBM233-P0926GX The National Bureau of Statistics announced a day earlier that the June manufacturing PMI recorded 49.5, the same as the previous month, two consecutive months below the line of expansion and contraction.

According to the sub-data of Caixin China Manufacturing PMI, the supply and demand of the manufacturing industry continued to expand in June, and the production index rose within the expansion range for five consecutive months, and the growth of consumer goods was particularly significant. The new orders index fell slightly in the expansion range, of which the demand for consumer goods and intermediate goods was stronger than investment goods, although the new export orders index was above the critical point in the month, the growth rate fell to a new low in nearly six months, and the demand in overseas markets weakened slightly.

Manufacturing employment was stable, and although the June employment index was in contraction territory for the tenth consecutive month, it was only slightly below the line of expansion and contraction, and employment of consumer goods and intermediate goods manufacturers was better than that of investment goods manufacturers. The survey showed that the contraction in employment was caused by a combination of separations and layoffs, which were almost offset by an expansion in employment spurred by the need to increase production.

New orders are pouring in, and the backlog of work index is above the expansion line for the fourth month in a row. Increased production and outbound freight delays led to a rise in inventories, and the finished goods inventory index ended the contraction trend in May and returned to the expansion range. The purchasing index edged down in expansion territory in June, the second-highest level in nearly three years, but inventories of raw materials also edged down in expansion territory as production accelerated.

FBM233-P0926GX Steel, copper, aluminum and other metal raw materials prices rise and freight increases, promote the production cost of manufacturing enterprises to rise, raw material purchase price index in the expansion range rose to a new high in the past two years, June factory price index for the first time in the year on the line, the industrial classification are generally raised product prices.

The optimism of manufacturing entrepreneurs declined significantly, and the production and operation expectations index remained in expansion territory in June, but fell more than 3 percentage points from the previous month, and was the lowest value since December 2019. Manufacturing entrepreneurs are mainly concerned about the downward pressure on the economy and the fierce market competition.

Wang Zhe, a senior economist at Caixin Intelligence Group, said that in June, the prosperity of the manufacturing industry remained good, supply, domestic demand and exports maintained expansion, purchase volume and inventory rose, the price level rose slightly, and the contraction of employment improved, but the optimism of manufacturing entrepreneurs declined significantly. Lack of market confidence and insufficient effective demand are still major challenges facing the current economy. Looking forward to the future, the policy support for the economy still needs to be further strengthened, and the “three major projects” in the early stage, the optimization and adjustment of real estate control measures, large-scale equipment renewal and the replacement of consumer goods with old ones need to be further effective. In addition, the promotion of fiscal and tax reform and other related policies should pay special attention to cultivating optimistic expectations of market operators.