China's manufacturing posts strongest quarter since 2020

China's RatingDog manufacturing PMI eased to 51.7 in June, capping a Q2 average of 51.9 — the strongest quarter since late 2020, according to Reuters.reuters
Job creation hit its fastest pace since August 2023, while new export orders contracted for a second straight month amid uneven global demand.reuters+1
Domestic consumption remains fragile, with retail sales falling in May for the first time since late 2022 and HSBC halving its 2026 forecast.reuters+1

China's manufacturing sector closed out its strongest quarter in nearly six years, with a private business survey released on Wednesday showing factory activity expanded for a seventh consecutive month in June even as the pace of growth eased slightly.

The RatingDog China General Manufacturing Purchasing Managers' Index, compiled by S&P Global , slipped to 51.7 in June from 51.8 in May but came in above the 51.6 consensus forecast, according to Reuters. The second-quarter average of 51.9 was the highest for any quarter since the fourth quarter of 2020.cnbc+1

New Orders Extend Streak as Jobs Pick Up

New orders rose for a thirteenth consecutive month, the joint-longest expansion run since 2018, even as new export orders contracted for a second straight month. Employment increased for the first time in three months, with job creation at its fastest pace since August 2023. Input cost inflation slowed to a five-month low, offering some relief to manufacturers' margins, while output price inflation edged up slightly.reuters+1

Output grew for a seventh straight month, though the pace eased to a three-month low. High-tech manufacturing remained a standout, with the official NBS PMI for that subsector climbing to 53.5 in June on demand tied to the global artificial-intelligence investment boom.global.chinadaily+1

Domestic Demand Remains the Weak Spot

Despite the encouraging factory data, analysts warn China's broader economy remains fragile. Retail sales fell 0.6% year-on-year in May, the first monthly decline since December 2022, while fixed-asset investment contracted 4.1% in the first five months of the year, according to Reuters. HSBC halved its 2026 retail sales growth forecast to 2.8%, citing weak consumer confidence and a prolonged property market slump.reuters+1

BofA's Helen Qiao noted that supply-side factors have been "pretty resilient for some time," but "the question is really on the demand-side — consumption and investment". Julian Evans-Pritchard of Capital Economics said external demand and AI-related tech orders remain "the main engine of growth for China's manufacturing sector," while real estate services were "still struggling".bloomberg+1

Beijing has set its 2026 growth target at between 4.5% and 5%, the lowest since 1991, underscoring the challenge of sustaining momentum as elevated U.S. tariffs and weak household spending continue to weigh on the world's second-largest economy.woodcentral

Sources (39)