Goldman Sachs China: Manufacturing PMIs Mixed, but Inflation Pressures Persist; Official Non-Manufacturing PMI Ties Post-Covid Low
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Goldman Sachs noted that China's June manufacturing Purchasing Managers' Index data presented a mixed picture, while underlying inflation pressures continued to build. The official manufacturing PMI edged up slightly to 50.2 from a prior reading of 50.1, marginally exceeding market expectations but showing limited overall improvement. Conversely, the Caixin manufacturing PMI declined to 51.0 from 51.7, indicating weakening momentum among small and medium-sized enterprises. Inflationary pressures remained prominent, as the input price sub-index climbed to 57.5 from 56.0, and the output price sub-index rose to 53.8 from 52.5. Meanwhile, the official non-manufacturing PMI dropped to 53.0, tying its post-pandemic low. This decline was driven by softer activity across both the services and construction sectors, with the services PMI falling to 52.8 and construction dropping to 55.7. Demand-side indicators weakened, with new orders slipping to 50.2 and new export orders declining to 47.8, reflecting persistent external weakness. The employment sub-index also deteriorated slightly to 48.4. Furthermore, inventory data suggested active destocking by enterprises. Given these uneven recovery dynamics, characterized by rising prices alongside faltering demand and employment, Goldman Sachs anticipates mounting pressure for additional policy easing to stabilize economic growth.
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