Manufacturing Sector Shows Weakness

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Manufacturing Sector Shows Weakness

China Starts H2 On A Weaker Note

The official manufacturing PMI in China is now sitting at multi-month lows and is already below the 50 level. According to Standard Chartered, this is a sign that China is starting the 2nd half of 2025 on a weaker note.

The key reason behind the decline in the manufacturing PMI is the tariff impact. On the surface, China is downplaying the tariffs situation, but its effects have already started to show in the data.

Manufacturing Pmi Declines Again

Meanwhile, the retail sales and the FAI are showing signs of recovery. But the key indicator is the CPI inflation, which has turned negative. According to Standard Chartered, the PPI is also on a deflation path as the commodity prices have jumped.

The overall data from the PMI shows that the slowdown in China is broader-based. In fact, even the new orders PMI has entered the contraction phase, and that's not a good idea.

Unlike other countries, the manufacturing sector of China is the key driver of growth. So, any decline in this sector affects the entire Chinese economy.

In addition, the services PMI is now also very close to the 50 level. Any further dip in the index will put the services sector of China into a contraction phase.

Looking ahead, Standard Chartered believes that the IP and export growth of China will remain weak. The reason for this is the weaker demand and the US tariffs.

During the same period, China's imports also showed contraction. As a result, China has managed to achieve a sizable trade surplus.

In the long term, the chances of any recovery in the Chinese manufacturing sector are highly unlikely. Amidst the whole tariff situation, China will need to find new markets for its products/services really fast.

Also, the government will need to take measures so that the Chinese economy drives its growth from local consumption.

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