China's June PMI likely to drop to 50.5 as factory operation stabilizes: economist

Source:Global Times Published: 2020/6/29 18:19:58

Workers are busy at a factory targeting poverty alleviation in Daqinggou Town of Shangyi County, north China's Hebei Province, June 2, 2020. Local authorities of Shangyi County have put great efforts to relocate impoverished residents in recent years. (Xinhua/Yang Shiyao)

China's Purchasing Managers' Index (PMI) is likely to drop from 50.6 in May to 50.5 in June, meaning the country's economic growth may slow down a little bit as factory operation stabilizes , Chinese economists predicted on Monday, a day before the official figure is released.

"Due to the stabilizing work resumption rate in the country, China's PMI in June is expected to drop to between 50.3 and 50.6, and is more likely to be 50.5," Liu Xuezhi, a macroeconomics expert from the Bank of Communications, told the Global Times on Monday.

The impact of floods in some southern provinces and the resurgence of the coronavirus in Beijing, which partly affected business activities, also contributed to the PMI drop, Liu noted, adding that the severe global pandemic situation affects some export-related factories.

PMI is a major indicator of a country's manufacturing growth. When the reading is above 50, the manufacturing sector is in expansion, and a reading below 50 indicates contraction. 

China's PMI dropped to 35.7 in February when COVID-19 endemic broke out. After the domestic situation was gradually eased, the PMI rose to 52 in March. Though the reading has been above 50 since March, it has been on a decreasing trend - down from 50.8 in April and 50.6 in May.

"From the production point of view, as the speed of work resumption is slowing down, with many factories stabilizing operations and some even seeing a year-on-year output increase in recent months, PMI is becoming normal and the room for further increase is narrowing," Liu said.

However, from the consumption point of view, as many people are still cautious of traveling due to the virus, consumption in China has yet to fully recover. That offers more potential for economic growth after the pandemic is fully controlled and the pent-up demand is released, Liu said.

"With the central government' strong supporting policies, the demand for investments in new infrastructure in particular offers huge potential for China's economy to grow further in the near future," Liu said.

Posted in: ECONOMY

blog comments powered by Disqus