China's manufacturing PMI falls below 50 in July as orders shrink

New orders dropped to 48.5 as non-manufacturing activity fell to 49.0.

China's business activity slipped back into contraction in July as weaker domestic demand pushed manufacturing and non-manufacturing activity below the 50-point threshold, UOB Kay Hian said.

The country’s manufacturing purchasing managers' index (PMI) fell to 49.2 in July from 50.3 in June, missing Bloomberg's consensus forecast of 50.1. The non-manufacturing PMI declined to 49.0 from 50.2, below the consensus estimate of 50.0.

The report said the decline was led by domestic demand, with the manufacturing new orders index falling to 48.5 from 51.2. By comparison, the new export orders index eased to 49.6 from 50.1, suggesting the weakness was led by domestic demand.

Manufacturing output also returned to contraction, with the output index falling to 49.9 from 51.4. The purchases index dropped to 49.4, whilst the imports index declined to 47.5, pointing to weaker input procurement. The inventory of finished goods index rose to 48.6.

The purchase prices index eased to 53.2 but remained in expansion territory, whilst the output prices index fell to 47.8, remaining in contraction.

UOB Kay Hian said higher input costs and lower output prices continued to pressure manufacturers' margins.

The non-manufacturing PMI was dragged lower by the construction industry index, which fell to 47.0, its lowest level in the current cycle. The report attributed the decline in part to seasonal summer disruption to construction activity and continued weakness in the property sector.

The services industry index also returned to contraction at 49.3, whilst the new orders index fell to 44.4, and the new export orders index eased to 47.0.

The gap between input and selling prices widened, indicating renewed margin pressure.

Business activity weakened across companies of all sizes. The composite index for large enterprises fell to 49.5, its first contraction reading since November 2025, whilst medium-sized enterprises recorded 49.7, and small enterprises declined to 47.4.

UOB Kay Hian said the July Politburo meeting confirmed that further demand-support measures would be introduced in the second half of 2026.