Chinese manufacturing activity grew slightly above expectations in June as business activity was aided by strong export demand and robust artificial intelligence spending.
But activity barely remained in expansion territory, as sluggish domestic demand and weak consumer spending continued to weigh.
China’s official manufacturing purchasing managers index rose to 50.3 in June, slightly above expectations of 50.2 and accelerating from the 50.0 seen in the prior month, government data showed on Tuesday.
Activity was fueled chiefly by strong export demand, as overseas buyers front-loaded orders in the face of heightened uncertainty over the Middle East conflict and oil prices. But with the U.S. and Iran agreeing to a peace deal, and with oil prices back at pre-war levels, this trend may lose steam in the coming months.
“The improvement was particularly pronounced for export orders, suggesting that external demand remains the main engine of growth for China’s manufacturing sector,” Capital Economics analysts wrote in a note, adding that despite the improvement, the manufacturing sector still appeared to be slipping back towards deflation.
Non-manufacturing PMI rose 50.2 against expectations of 49.9, with growth also improving marginally from 50.1 in the prior month. The print showed some signs of life in local services activity, although overall demand still remained languid.
China’s composite PMI rose to 50.6 in June from 50.5 in May.
ING analysts said while Tuesday’s PMI print was stronger than expected, it they still expected a slowdown in second-quarter economic growth.
Still, such a trend could prompt more stimulus measures from Beijing.
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