China's Three Major PMIs All Fall Below the Boom-Bust Line in July
N.R. Finch
China's manufacturing, non-manufacturing, and composite PMIs all fell below the 50 expansion threshold in July, ending four straight months of growth and intensifying pressure on Beijing to deliver fresh stimulus in the second half.
All three gauges below 50 — what does that mean?
July manufacturing PMI came in at 49.2%, down 1.1 points from June and the lowest since February. This means → factories shifted from expansion back into contraction.
Non-manufacturing activity fell to 49.0%; the composite PMI hit 49.3%. All three readings sit below the critical line.
In plain terms = PMI is a thermometer for the economy, with 50 as "normal." All three thermometers dipping below 50 signals that manufacturing and services cooled in tandem.
Inside manufacturing — who is still expanding?
High-tech manufacturing PMI registered 53.3%; equipment manufacturing hit 51.4% — both well above the headline number and still expanding. Production and new-order sub-indices for computing and telecom equipment exceeded 53.0%.
Consumer-goods PMI fell to 47.8%; energy-intensive industries slid to 47.0%. Autos and ferrous-metal smelting dropped below the threshold.
This reflects a structural split: high-end manufacturing is carrying the sector alone, while traditional and consumer industries are weakening across the board.
What exactly went wrong on the demand side?
The new-orders sub-index plunged to 48.5%, down 2.7 points — the biggest single drag this month. This means → factories are not unwilling to produce; orders are shrinking fast.
Input-price index stood at 53.2%; factory-gate prices fell to 47.8%. Both have declined for four consecutive months. In plain terms = raw materials are still getting more expensive, but finished goods are getting cheaper — margins are squeezed from both ends.
The purchasing-volume index dropped to 49.4%, showing firms are actively cutting inventory orders.
Services: can a summer tourism bump save the picture?
The services activity index fell to 49.3%, down 1.1 points. Summer spending lifted air transport, hotels, and entertainment noticeably.
But wholesale trade and monetary-financial services saw steep declines. Capital-market services and real estate remained below the threshold.
This means → summer travel is a bright spot, but it is not enough to pull the entire services sector back into expansion.
Why did construction suddenly slow down?
Construction activity dropped to 47.0%, down 2.0 points; new orders plunged to 40.1%.
The NBS attributed the slowdown to extreme heat, heavy rain, and flooding in parts of the country. The construction expectations index rose 0.7 points to 51.8% — firms view the disruption as temporary.
In plain terms = weather stalled job sites, but construction firms themselves believe they can make up the lost ground in the second half.
What will markets watch next?
Q2 GDP grew 4.3% year-on-year, already below the lower bound of the full-year target range. The simultaneous PMI downturn adds further policy pressure.
The manufacturing expectations sub-index remains at 54.1%; the employment index edged up 0.5 points to 49.0%, suggesting firms have not begun large-scale layoffs.
This means → August trade, retail, and investment data become the key checkpoints — markets want to see not just expectations, but real signs that stimulus is landing.
Content is for reference only, not financial advice.