China manufacturing PMI falls short of expectations for July

  • China reports that factory activity was slightly lower than expected in July.
  • The official manufacturing Purchasing Manager's Index (PMI) for July comes in at 51.2 — falling short of the analyst-expected 51.3.
Workers move rolls of aluminium at a factory in Zouping in China's eastern Shandong province on April 7, 2018.
AFP | Getty Images
Workers move rolls of aluminium at a factory in Zouping in China's eastern Shandong province on April 7, 2018.

China reported on Tuesday that factory activity was slightly lower than expected in July, with the official manufacturing Purchasing Manager's Index (PMI) coming in at 51.2.

The Chinese manufacturing PMI had been forecast to fall to 51.3 in July from 51.5 in June, according to a poll of economists by Reuters.

A reading above 50 indicates expansion, while a reading below that signals contraction.

China's official services PMI also fell in July, with the reading data coming in at 54.0 from 55.0 in June, the National Bureau of Statistics reported.

The PMI readings in July were affected by adverse weather, a rise in global trade tensions and other seasonal factors, Chinese statistics bureau statistician Zhao Qinghe wrote in an analysis of the data published online.

The manufacturing PMI was positive considering escalating U.S.-China trade tensions, said Sian Fenner, senior economist at Oxford Economics. Despite the on-month fall, the services PMI still showed solid expansion, she added.

Fenner added, however, that she expected the negative impact from the U.S.-China trade spat to manifest in economic data released later this year.

"The U.S. importers have actually been bringing forward their demand for Chinese goods before these tariffs actually hit so that's actually providing some kind of support for Chinese exports. But as we go further into the year, into 2019, that's when we will really start to see demand start to soften and these tariffs actually start to bite a bit more," Fenner told CNBC.

Economic data from China is being closely watched amid trade tensions between Beijing and Washington.

U.S. tariffs on $34 billion of Chinese products took effect on July 6. China retaliated with duties of its own on the same value of American goods.

President Donald Trump's administration countered that it is preparing possible tariffs on $200 billion more in Chinese goods. Earlier this month, the president said he was willing to slap tariffs on every Chinese-made product shipped to the U.S.

China's official PMI gauge focuses on large companies and state-owned enterprises, while another set of readings by Caixin and IHS Markit focuses on small and medium-sized enterprises — that private manufacturing PMI reading is set to be released on Wednesday.