China factory activity at 4-month low amid Asian supply chain disruptions

Workers place batteries on a machine at a factory manufacturing lithium batteries in Huaibei.

China’s June official manufacturing Purchasing Manager’s Index eased slightly to 50.9 versus 51.0 in May, data from the National Bureau of Statistics showed on Wednesday. It, however, exceeded analysts’ forecast for a slowdown to 50.8.The soft factory activity data aided a rebound in Chinese stocks on Wednesday as it eased fears of policy tightening.

The sub-index for production eased to 51.9, a four-month low, from 52.7 the previous month. Zhao Qinghe, a senior statistician at the NBS, attributed the slowdown in production to constraining factors such as a shortage of semiconductors, inadequate coal supply, a power crunch and maintenance of equipment.

A sub-index for raw material costs in the official PMI stood at 61.2 in June, compared with May’s 72.8, as the government cracked down on high raw material prices.Economists at Nomura believe the PMI prints were still solid in the second quarter, despite recent sequential moderation, pointing to the resilience of China’s economy amid the recent resurgence of infections in Guangdong province.

“Much of the recovery has occurred and the momentum is slowing. Combined with a relatively higher base, this means year-on-year GDP growth is expected to slow to 7.2% in Q2 from 18.3% in Q1,” said analysts at HSBC.

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