Manufacturing activity in China is currently experiencing a slump as it hits its lowest reading since the start of 2019, according to the Caixin/Markit factory Purchasing Managers’ Index. June’s 49.4 reading failed to rise from the PMI reading of May, which was 50.2. Analysts expected June’s reading to breach the 50-point mark, but it ended up the second-lowest point of 2019 following January’s 48.3 showings.
PMI readings help determine if companies are doing well in business for expansion. A reading above 50 indicates that companies can consider expansion. However, ending below 50 means that the company may be falling. The disappointing reading may likely be the result of lower domestic demand. CEBM Group macroeconomic analysis director Zhengsheng Zhong shares that the whole economy of China felt under pressure for this month.
Zhong adds that policymakers need to come up with new policies to improve the status of manufacturing. Zhong believes that they should focus on developing new infrastructure, consumption, and high-tech production. The survey by Caixin is equal to the result of the official PMI reading by China’s National Bureau of Statistics, which took respondents from a pool of private and state-owned businesses. Caixin gets its respondents from small and medium firms. Caixin’s results and China’s official reading make it clear to everyone that manufacturing activity is plummeting.
The PMI reading is a way for businesses to get data on the current status of the country’s economy. It serves as a source of awareness for investors. The PMI reading is one of the first economic indicators that gets released every month, which will help shape how investors spend their money. With the readings falling below the expansion line, China’s manufacturing might see fewer investors take a gamble on them.