China factory growth holds steady; recovery extends to seventh month

The surge in new order continued for a 13th consecutive month.

China’s manufacturing sector maintained its momentum into the close of the second quarter, with the RatingDog China General Manufacturing Purchasing Managers’ Index (PMI) registering 51.7 in June.

This shows a marginal dip from May’s 51.8 but sufficient to extend the run of expansion above the 50.0 no-change mark to seven consecutive months.

The reading brought the quarterly average to 51.9, the strongest since the final quarter of 2020, underscoring a steady, if unspectacular, recovery in factory activity across the world’s second-largest economy.

New orders continued their upward trajectory for a thirteenth successive month, matching the joint-longest stretch of growth since 2018.

Export orders, however, told a more subdued story, slipping for a second month running, though the decline remained only marginal. Output likewise rose, albeit at a gentler pace than in May, rounding off the strongest quarterly production growth since the second quarter of 2024.

Employment offered one of the more encouraging signals in the survey. Manufacturers expanded their workforces for the first time in three months, with the pace of hiring the fastest recorded since August 2023 — a development likely to be welcomed by policymakers wary of labour market slack.

On costs, input price inflation eased to a five-month low, providing manufacturers some breathing room even as output prices rose for a sixth consecutive month. Backlogs of work grew for a fifth straight month, supplier delivery times lengthened marginally for a fourth month, and stocks of finished goods remained broadly unchanged.

Commenting on the data, Yao Yu, founder of RatingDog, said operating conditions had continued to improve steadily, citing accelerating new order growth, contained inflationary pressure and stronger employment as the principal drivers behind the quarter’s performance.

Business confidence, however, offered a note of caution. Sentiment regarding the year-ahead outlook, while still in positive territory, fell to its weakest level since January, with firms adopting a more guarded stance. Yao said this reflected persistent external demand weakness and cautioned that softening confidence remained a risk factor bearing close watching in the months ahead.