June data highlighted a challenging month for Chinese manufacturers, with trade tensions reportedly causing renewed declines in total sales, export orders and production. Companies responded by reducing headcounts further and making fewer purchases of raw materials and semi-finished items. At the same time, selling prices were raised following another increase in input costs, though rates of inflation were negligible. Business sentiment was broadly neutral at the end of the second quarter, with firms mainly concerned about the US-China trade dispute. Falling from 50.2 in May to 49.4 in June, the headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – was below the critical 50.0 threshold for the first time in four months. The latest figure was, however, indicative of only a marginal deterioration in operating conditions. Amid reports of trade tensions, total new business and international sales declined at the end of the second quarter. The former contracted for the second time in 2019 so far, albeit moderately. Concurrently, the fall in exports followed from a renewed increase in May. Goods producers lowered output in June, thereby ending a four-month sequence of expansion. That said, the pace of contraction was only slight. Sub-sector data indicated that consumer goods bucked the trend and was the only category to record production growth in June. As has been the case since April, Chinese manufacturers shed jobs during June. The pace of contraction was broadly similar to those seen in the remainder of the second quarter. Anecdotal evidence suggested that voluntary leavers had not been replaced.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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