China’s factory activity dips for first time in nine months

China’s factory activity dips for first time in nine months

China’s manufacturing activity unexpectedly shrank for the first time in nine months in July, a private survey showed, a sign the country’s export machine might be cooling, darkening the economy’s outlook.

The Caixin manufacturing purchasing managers index fell to 49.8 last month from 51.8 in June, according to a statement released by Caixin and S&P Global Thursday. It missed the median forecast of 51.5 and was the first time since October the gauge dropped under 50, which indicates contraction.

The private measure likely reflects weakening momentum in overseas shipments as it focuses on small and export-oriented firms. The bearish reading is another warning sign for a rare bright spot in the No. 2 economy after an official measure showed factory activity shrank for a third straight month in July.

China’s economy has been bolstered by robust exports and industrial production this year as consumption remains subdued amid a persisting housing slump. The uneven nature of the recovery has prompted calls for measures to stimulate spending to maintain growth.

“The most prominent issues are still insufficient effective domestic demand and weak market optimism,” Wang Zhe, senior economist at Caixin Insight Group, said in a statement accompanying the data release.

Total new orders declined for the first time since July last year, the Caixin survey suggested.

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The Caixin results has been stronger than those from the official poll in every single month since October as exports stayed strong. The two surveys cover different sample sizes, locations and business types.

Chinese factories are facing rising uncertainties as regions including the EU move forward with tariffs on goods from the country such as electric vehicles. Former US President Donald Trump’s threat to impose duties of 50% or more on Chinese imports if he returns to the White House has prompted many local plants to front-load shipments, boosting activity gauges in previous months.