China - July PMI

The headline PMI was weak in July, and the details were soft too. There's no sign of the cycle finding a durable floor.

The official manufacturing PMI in July was weak, falling back below 50 for the fourth month this year. The details were also soft: input prices fell to 40.4, pointing to a decline of around 1.5ppts in YoY PPI in July; the 6M business outlook score dropped to just 52, even lower than during the lockdowns in April; and new orders softened.

It was overseas orders that fell in July. That is significant in itself, given it is exports that have been the main motor of the industrial sector for the last year or so. And nothing else seems to be falling into place to replace exports, with domestic orders flat-lining in July at a low level.

The one positive indicator for the industrial cycle was the renewed rise in the construction PMI, which had been very weak the last couple of months. Ordinarily, that would be one sign of domestic stimulus. But again, if there really was something afoot, then domestic orders should be rising too. On its own, the rise in the construction PMI doesn't feel like a convincing indicator.