- Caixin PMI shows factory activity expands
- New export orders contracts for third straight month
- Major stimulus measures from key meeting unlikely: economists
BEIJING, July 1 (Reuters) - China's factory activity returned to expansion in June, supported by an increase in new orders that lifted production, a private-sector survey showed on Tuesday.
The Caixin/S&P Global manufacturing PMI rose to 50.4 in June from 48.3 in May, surpassing analysts' expectations in a Reuters poll. The 50-mark separates growth from contraction.
The reading contrasts with China's official PMI on Monday that showed factory activity shrank for a third straight month. But new export orders in both surveys remained in negative terrain in June, suggesting potential challenges for exports in the second half of the year.
"Overall, manufacturing supply and demand recovered in June," said Wang Zhe, economist at Caixin Insight Group.
"However, we must recognise that the external environment remains severe and complex, with increasing uncertainties. The issue of insufficient effective demand at home has yet to be fundamentally resolved."
Overall new orders increased in June after falling in May, with factory bosses citing an improvement in trade conditions and promotional activities to boost sales, the Caixin survey showed.
That drove factory output to the highest reading since November 2024.
Due to higher new work inflows and a reduction in workforce capacity, accumulation of backlogged orders was recorded for the first time in three months.
Employment across the Chinese manufacturing sector contracted in June amid both resignations and redundancies, according to respondents. Some smaller exporters had to sell at a loss or to cut wages and jobs to stay afloat.
Average output charges fell at the most pronounced pace since January, which in turn was supported by lower input costs. Export charges continued to increase, however, driven by rising shipping and logistics costs.
The level of business confidence eased from May and remained below the series long-run trend.
Goldman Sachs economists said the upcoming July Politburo meeting, a key meeting to discuss the economy, is unlikely to result in major stimulus measures, as policymakers appear satisfied with the economic performance so far this year.
In trade developments, U.S. Treasury Secretary Scott Bessent announced last week that the United States and China had resolved issues surrounding shipments of Chinese rare earth minerals and magnets, building on a deal reached in May in Geneva.
China's Commerce Ministry said on Friday export applications for controlled items would be approved in accordance with the law.
Reporting by Ellen Zhang and Ryan Woo; Editing by Jacqueline Wong
Source: Reuters