July Manufacturing PMI Slips to 49.3% Amid Seasonal Slowdown and Adverse Weather Conditions

In July, China’s manufacturing momentum softened as the official Purchasing Managers’ Index (PMI) declined to 49.3%, a 0.4 percentage point decrease from the prior month, according to figures published by the National Bureau of Statistics.

Zhao Qinghe, a senior official at the Service Industry Survey Center, attributed the downturn to seasonal production patterns and disruptive weather events—specifically high temperatures and substantial rainfall—that affected industrial operations across multiple provinces.

Further contributing to the contraction were broader macroeconomic and regulatory factors. Oriental Jincheng’s Chief Macro Analyst, Wang Qing, explained to Jiemian News that although economic activity showed resilience in the first half of the year, current conditions reflect a pause in policy intervention. Earlier stimulus measures that spurred consumer and investment activity have tapered off. Concurrently, policies to mitigate excessive market competition—referred to as “anti-involution”—have led to elevated commodity prices, notably in steel and coal. These price increases have helped ease downward pressure on the Producer Price Index (PPI), yet have constrained production levels across select manufacturing segments.

Component indices of the PMI revealed further declines. The production sub-index registered at 50.5%, while new orders slipped to 49.4%, reflecting respective month-on-month decreases of 0.5 and 0.8 percentage points. Meanwhile, the new export orders index dropped 0.6 points to settle at 47.1%.

Pricing metrics edged upward through July. The index for input costs on key materials rose by 3.1 points to 51.5%, while the ex-factory prices moved up by 2.1 points to 48.3%. This marked the first instance since March in which input prices exceeded the neutral 50-point benchmark, suggesting a marginal recovery in pricing dynamics.

Forecasts indicate that August may continue to present challenges. According to Xu Tianchen, Senior Economist at the Economist Intelligence Unit, manufacturing faces headwinds from ongoing “anti-involution” measures, which are compressing margins both upstream and downstream. Additionally, heightened climate volatility may disrupt regional productivity. As a result, Xu anticipates the PMI will remain below the threshold required for expansion.

Wang Qing expressed a guarded stance regarding policy momentum. He noted that stronger-than-expected growth earlier in the year reduces the likelihood of immediate new stimulus. Moreover, while the United States has finalized trade agreements with Japan and the European Union, the transient benefits of trade redirection are expected to fade by August, increasing volatility in Chinese exports. Weakness in the domestic real estate market further compounds the sector’s challenges, potentially prompting continued marginal dips in the PMI.

Despite short-term pressures, Wang pointed to emerging signs of policy realignment. He highlighted the nationwide introduction of childcare subsidies on July 28 as a signal of growing domestic demand-focused initiatives. These programs are expected to include expanded fiscal measures, an accommodative monetary approach, and renewed efforts to support the real estate sector. Collectively, these interventions are seen as having ample policy space for implementation and are projected to help counterbalance waning external demand while fostering economic stability in the months ahead.

In terms of fiscal positioning, the National Development and Reform Commission (NDRC) disclosed via a July 24 post that RMB 735 billion in central budget funds for 2025 has already been earmarked. These resources are designated for upgrades across industrial systems, infrastructure development, urban and rural regeneration, regional harmonization, ecological advancement, public services, security enhancement, and post-disaster rebuilding.

Furthermore, the NDRC previously announced on July 3 that over RMB 300 billion had been assigned to the third round of “dual-priority” initiatives for 2025. These projects target national strategic infrastructure and critical security needs. With this announcement, the full RMB 800 billion slated for such programs this year has been allocated.

In the services sector, July saw the Non-Manufacturing Business Activity Index settle at 50.1%, a 0.4 percentage point dip from June, though it remains in expansion territory. Within this category, the construction activity index dropped 2.2 points to 50.6%, and the services activity index declined slightly by 0.1 point to 50.0%.