The second half of the year has gotten off to a rocky start for Chinese manufacturing. According to the monthly business survey released today by U.S. financial services firm S&P, the Purchasing Managers Index dropped 1.3 points to 49.2 in July.
The barometer hasn’t been below the growth-signaling level of 50 since April, which it now is for the first time. The widely followed measure was predicted to remain barely over that line, at 50.3 points, by economists surveyed by Reuters. According to economist Wang Zhe of the Chinese media outlet Caixin, which sponsored the poll, “both supply and demand have decreased.”
Orders for exports are declining
Since the year’s beginning, both new orders and output have weakened more than before. Particularly, new export orders declined significantly in July as the likelihood of a recession among important consumers of Chinese goods grew. Similar circumstances exist in other Asian nations, such as export-dependent South Korea.
According to Capital Economics analyst Shivaan Tandon, “falling new orders, a dismal employment outlook, and high inventories point to subdued industrial activity in the months ahead” when referring to developing Asia.
Considering that corporate earnings fell in the first half of the year, Chinese industry is already under pressure. They decreased by 16.8% from the first half of 2022, with state-owned enterprise surpluses contracting at a faster-than-average rate.