China factory activity shrinks in July, S&P index dips below 50 mark

China’s manufacturing activity unexpectedly contracted in July from a month ago, according to a private survey, adding to worrying signs about the economy’s momentum in the period ahead.

 

The S&P Global manufacturing purchasing managers’ index for China fell to 49.5 from 50.4 in June, according to a statement released Friday, compared with the median forecast of 50.2 by economists. 

  A reading above 50 indicates expansion from the previous month. 

 

The results of the private survey were in line with the official reading released Thursday, which showed factory activity deteriorated at the worst pace in three months. The National Bureau of Statistics blamed the deterioration on disruptions caused by high temperatures, heavy rain and flooding in some regions.

 

Following solid economic growth in the first half of 2025, China may see weakening momentum going forward as tariff front-running by exporters wanes. Consumer sentiment remains sluggish despite the help from government subsidies, which are expected to have a diminishing impact due to a high base of comparison in late 2024. 

 

“The latest survey indicated that manufacturing production fell for only the second time since October 2023,” Jingyi Pan, economics associate director at S&P Global, said in the statement. “Demand from overseas remained subdued on the back of global trade uncertainty.”

 

New export orders contracted for a fourth straight month and at a faster pace than in June, according to the survey. While input prices increased for the first time in five months, firms weren’t able to pass on their rising costs to customers as they lowered selling prices again, it showed.

 

The results of the private survey have tended to be stronger than those from the official poll over the previous year as exports stayed strong. The two surveys cover different sample sizes, locations and business types, with the private poll focusing on small and export-oriented firms.

 

The private PMI is no longer named after Caixin after the media group ended its sponsorship last month.