China manufacturing PMI beats forecast at 50.3 in June

Export orders returned to expansion at 50.1 as purchase price inflation slowed.

China's manufacturing Purchasing Managers' Index (PMI) edged up to 50.3 in June from 50.0 in May, remaining in expansion territory and exceeding Bloomberg's consensus forecast of 50.1.

According to data from the National Bureau of Statistics, cited in a UOB Kay Hian report, the new orders sub-index climbed to 51.2 from 49.9, whilst the new export orders index returned to expansion at 50.1 from 48.6.

The manufacturing output sub-index increased to 51.4 from 51.2, whilst the purchases index rose to 51.4 from 49.8, reflecting stronger order books.

Input cost pressures eased during the month. The purchase prices index fell to 54.2 from 60.5, whilst the output prices index declined to 48.2 from 51.9.

UOB Kay Hian said purchase prices continued to rise whilst output prices fell, leaving manufacturers under pressure despite the narrower gap between the two indices.

"The return of manufacturing export orders to expansion and the marked easing in input costs are encouraging, whilst the rebound in medium-sized enterprises narrows the previously top-heavy divergence," UOB analysts Tham Mun Hon and Claire Wang said in the report.

The inventory of finished goods index slipped to 47.7 from 49.3, whilst the business expectations index rose to 54.3 from 53.9.

China's non-manufacturing PMI increased to 50.2 in June from 50.1, exceeding Bloomberg's consensus forecast of 49.9.

The services activity index remained in expansion at 50.4, whilst the construction index remained below the 50-point threshold at 49.0.

The report also showed a narrower gap in business activity across company sizes, with the composite PMI for medium-sized enterprises rising to 50.5 from 48.6 and returning to expansion.

Large enterprises remained in expansion at 50.7, down from 51.1, whilst small enterprises remained in contraction at 48.2, down from 48.5.

"That said, with small firms remaining in contraction and the construction sector staying soft, continued targeted policy support will be needed to broaden and sustain the recovery," the analysts said.