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China's Official Manufacturing, Non-Manufacturing PMI Dip in June

China’s Official Manufacturing, Non-Manufacturing PMI Dip in June

Posted Wednesday, June 30, 2021 by
Aiswarya Gopan • 1 min read

Manufacturing activity across China posted a slightly slower growth in the month of June, with businesses impacted by rising raw material costs as well as port disruptions across Guangdong province which hampered export activity. The official manufacturing PMI dipped to 50.9 in June from 51 in the previous month, but managed to beat economists’ forecast for a reading of 50.8 and remain above the 50-threshold indicating expansion in the sector.

While China has posted a stronger rebound in economic activity after effectively controlling the pandemic, the uneven pace of recovery around the world has impacted China’s supply chain. In addition, sporadic breakout of fresh COVID-19 infections across the export region of Guangdong also weighed on the manufacturing sector, driving a dip in the overall PMI reading.

In more worrying news, Chinese services sector activity reported a sharper slowdown in activity over June amid fresh restrictions imposed across the Southern region to combat a resurgence in cases. China’s official non-manufacturing PMI dropped to 53.5 for the month of June from 55.2 in May.

Despite the disappointing drop, analysts remain upbeat about the prospects of China’s economic recovery stabilizing. They remain hopeful as domestic consumption and services sector remain in expansion mode even as exports and manufacturing continue to post growth over successive months.

Impact on USD/CNH

The data drove some weakness in the Chinese yuan earlier in the day, turning the USD/CNH currency pair bullish. However, the uptrend can also be attributed to the recent strengthening of the US dollar, which is keeping other currencies including the CNH under pressure.

USD/CNH

Although, since then, the Chinese yuan has posted a slight recovery. At the time of writing, USD/CNH is trading at around 6.464.

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