Goldman Sachs: China PMI Shows Mild Recovery, but Prices and Construction Remain Weak
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Goldman Sachs notes that China's official June PMI data signals a mild recovery in manufacturing and services, though the construction sector remains in contraction. The manufacturing PMI rose to 50.3, beating market expectations, driven by improvements in new orders and output. The non-manufacturing PMI edged up to 50.2.
However, the most critical macroeconomic takeaway is the pronounced weakness in price sub-indices. The input price index plummeted from 60.5 to 54.2, and the output price index fell below the breakeven line to 48.2. While lower oil prices and commodity costs eased inflationary pressures, weak factory-gate prices indicate persistent deflationary competition and squeezed corporate profit margins.
The non-manufacturing sector showed divergent trends. Digital economy and financial services demonstrated resilience, but aviation transport and real estate services stayed below 50. The construction PMI remained subdued at 49.0, constrained by adverse weather and underlying weakness in property-related activities.
Overall, Goldman interprets this as a slight stabilization rather than a comprehensive demand reversal. With the employment sub-index at 48.4 and property services contracting, domestic demand requires further policy support. The bank suggests monitoring the July Politburo meeting and fiscal expenditure pace to verify if this short-term stabilization can transition into a stable expansion.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
