China’s manufacturing activity unexpectedly contracts in July on more COVID-19 outbreaks

Steady contraction in energy-intensive industries such as gasoline, coking coal and ferrous metals contributed more to the drop in July’s manufacturing PMI, it said.

The production and new orders sub-indices fell 3 points and around 2 points in July, respectively, while the employment sub-index fell 0.1 point.

Weak demand has limited the recovery, Bruce Pang, chief economist at Jones Lang Lasalle Inc, said in a note to clients. “Third-quarter growth may face greater challenges than expected as the recovery is slow and fragile,” he added.

The official non-manufacturing PMI in July fell to 53.8 from 54.7 in June. The official composite PMI, which includes manufacturing and services, fell to 52.5 from 54.1.

China’s economy barely grew in the second quarter amid widespread lockdowns, and officials recently signaled that its strict zero-COVID policy would remain a priority.

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