China’s manufacturing activity contracts for a third month amid deflation woes

China’s manufacturing activity contracted for a third consecutive month in June, an official survey showed on Monday, fueling hopes of more stimulus to amortize the impact of current commercial disturbances.

The official purchase managers (PMI) index improved slightly at 49.7 in June compared to 49.5 in May, but remained below the expansion of the contraction of the 50 benchmarks. This figure was in accordance with the forecasts of 49.7 analysts in a Reuters survey.

The non -manufacturing PMI, which includes services and construction, increased to 50.5 from 50.3 in May.

Chinese manufacturers have brought with a thorough price war in an overabundance of supply and a demand from slow consumers, exacerbated by higher American rates that have overshadowed its exports to the largest consumption market in the world.

Country expeditions to the United States Immersed 34.5% in May A year ago and more than 21% in April, while exporters pivoted on alternative markets to avoid a triple figure rate that had briefly triggered before his return in mid-May.

Chinese Prime Minister Li Qiang said in an address in a Tianjin key economic forum last week that Beijing intensified efforts to stimulate domestic demand in what would make China a “Powerhouse of consumption.”

Consumer prices have also been mired in deflation this year, 0.1% drop in May from a year earlier.

A gauge on wholesale prices, or the price index of producers, saw the greater decrease since July 2023 In May, the deepening of a deflation that has endangered the manufacturing sector for more than two years. The benefits of Chinese industrial companies plunged 9.1% in May, their The clearest drop in seven months.

On Friday, the Chinese Ministry of Commerce said that Beijing had entered into an agreement with Washington on additional details on the existing commercial framework, noting that China would examine and approves eligible requests for the export of controlled items, while the United States would therefore cancel a series of restrictive measures against China.

Although the Declaration was considered a sign encouraging that bilateral trade negotiations are progressing, economists have warned that the lack of details had left a lot of doubt, including what criteria Beijing will use to assess the demand for export of rare earth magnets.

“This underlines how difficult and detailed business discussions,” said Wendy Cutler, Vice-President of the Asia Society Policy Institute, the latest two-parts development signals work to ensure that the preliminary agreement agreed in Geneva is implemented “in good faith”.

In a Separate declaration During the weekend, the Ministry of Commerce reiterated its opposition against other countries at the price request with the United States in any agreement that would compromise the interests of China. “If such a situation occurs, China will not accept it and take resolved countermeasures to protect its legitimate rights and interests,” the statement said.

A private survey of the Chinese manufacturing activity carried out by Caixin Media and S&P Global is due on Tuesday, which is expected to improve slightly at 49 in June from 48.3 in the previous month, according to a Reuters survey.

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