China factory activity worsens as exports show signs of slowing

The median estimate of economists surveyed by Bloomberg was 49.7. A reading below 50 indicates contraction.

China’s factory activity unexpectedly deteriorated in July despite a tariff truce with the US, as early signs emerge exports are slowing and weak domestic demand persists.

The official manufacturing purchasing managers’ index was 49.3, versus 49.7 in June, the National Bureau of Statistics said Thursday. The median estimate of economists surveyed by Bloomberg was 49.7. A reading below 50 indicates contraction.

The non-manufacturing measure of activity in construction and services fell to 50.1 from 50.5 last month, according to the statistics office. That compared with a forecast of 50.2.

The PMI figures are the first official data available each month to provide a snapshot of the health of the Chinese economy.

China’s top leaders touted the nation’s economic strength at a gathering of the decision-making Politburo Wednesday. That came after the country registered a record trade surplus in the first half of the year on soaring shipments to southeast Asia and stabilizing exports to the US.

But China’s resilience is facing headwinds. Cargo throughput at the nation’s ports last week was the lowest in almost three months and dropped nearly 7% from the previous seven days, a sign trade may be starting to slow.

Weak consumption could intensify deflationary pressures. A recent survey by the central bank found that Chinese households became more pessimistic last quarter and their view of the jobs market fell to its worst ever. That’s fanned fears of a slowdown in the second half of the year, even after a strong first six months of activity exceeded the official annual expansion target of about 5%.