China’s factory activity moved back into contraction in July, an unexpected shift that ended four straight months of expansion. Official data from the National Bureau of Statistics showed the manufacturing purchasing managers’ index fell to 49.2, down from 50.3 in June.
A reading below 50 indicates contraction, making the July figure a notable setback after a stronger second quarter. The latest result suggests momentum in the industrial sector weakened as the month progressed.
The pullback appears to be linked in part to an easing of the export surge that had helped support factory output earlier. As that boost started to fade, pressure increased on China’s manufacturing sector and added to the challenges facing officials in Beijing.
The PMI decline is likely to renew attention on the health of domestic demand and external trade conditions. With the four-month expansion streak now over, the July reading points to a more fragile backdrop for China’s factories in the near term.
