China’s June factory activity grows at fastest pace in 13 months (PMI)

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China’s manufacturing activity rose to its highest level in 13 months in June, buoyed by a strong rebound in output, as the lifting of COVID lockdowns prompted factories to rush to respond to the resumption of demand, a private sector poll revealed on Friday.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 in June, also indicating the first expansion in four months, from 48.1 the previous month. That was well above analysts’ expectations for a rise to 50.1.

The 50-point index separates growth from contraction on a monthly basis.

The recovery suggested in the Caixin survey, which focused on more export-oriented small businesses in coastal regions, was more compelling than the results of an official survey.

Economic activity accelerated in June since various COVID-related lockdowns were rolled back as COVID-19 cases declined, with a series of support measures unveiled by the Council of State in late May to stabilize the growth.

A production sub-index rebounded to the highest level since November 2020, while new orders, supported by the first increase in export orders in about a year, halted three months of declines and posted the fastest growth. faster in four months.

Lead times for suppliers stabilized in June amid easing supply chain issues, after deteriorating over the past two years.

However, despite the strong rebound, factories remained cautious in terms of additional hiring, with employment falling for the third consecutive month.

“Restoration in the post-pandemic era remained at the center of the current economy, but its foundation was far from solid,” said Wang Zhe, senior economist at Caixin Insight Group.

“Deteriorating household incomes and expectations caused by a weak labor market have held back demand recovery. Accordingly, supportive policies should target employees, gig workers and low-income groups affected by The epidemics.”

China’s economy has begun charting a course for recovery from the supply shocks caused by strict shutdowns, but headwinds persist, including record high unemployment in major cities, a still-sluggish property market, spending on low consumption and the fear of recurrent waves of infections.

Analysts expect economic conditions to improve further in the third quarter, although the official GDP target of around 5.5% for this year will be difficult to achieve unless the government abandons the zero COVID strategy. .

President Xi Jinping defended the zero COVID policy on Tuesday, saying China was willing to accept a temporary impact on economic development rather than damage to people’s health.

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