Official data: China’s manufacturing activity returns to expansion in June as demand climate improves

China's manufacturing PMI returned to expansionary territory in June, reading 50.3, up 0.3 percentage points from May and back above the 50 threshold. The production index climbed to 51.4, a 0.2 point gain, pointing to faster momentum on factory floors.

Demand was the standout. The new order index rose 1.3 points, the sharpest gain among the sub-indices, signalling a genuine recovery in domestic demand after an earlier soft patch. New export orders returned to expansion at 50.1, a shift the statistics bureau linked to easing Middle East tensions, which reduced fears of an energy and growth shock and restored confidence among foreign buyers.

Non-manufacturing activity also firmed, with the business activity index up 0.1 points to 50.2 and services up the same margin to 50.4%. Non-manufacturing new orders jumped 3.0 points to 48.0%, still below the expansion line but a sign the services and construction demand climate is turning more constructive, even as it lags production-side gains.

The data point to firmer footing for China's economy after two months of sluggish growth, with manufacturing and retail sales both rebounding. For regional petrochemical and commodity markets, the read-through is cautiously supportive, though non-manufacturing orders remaining sub-50 signals an uneven, not yet broad-based, recovery.

Exports were the bright spot, with US importers pulling forward shipments after the May Trump-Xi meeting steadied bilateral relations, and ahead of the looming July expiry of the 10% Section 122 levy.

Written by: Farid Muzaffar