In July, China's manufacturing activity unexpectedly contracted for the first time since February of this year, attributed to a decline in export volumes, according to CNBC. The official Purchasing Managers' Index (PMI) for the manufacturing sector fell from 50.3 in June to 49.2, dipping below the 50-point mark that separates growth from contraction.
The drop in the index ended a three-month streak of growth, which was driven by companies trying to accelerate deliveries ahead of an increase in trade tariffs by the U.S. According to the China Beige Book, "U.S. supplies have decreased for the first time in several months" after rising by 14% in June, which had previously contributed to a 27% increase in China's overall exports. Companies had been actively exporting goods until recently, anticipating that U.S. authorities would impose additional tariffs.
In the second quarter, China's economy grew by 4.3% year-on-year, marking the slowest growth rate in over three years. The country's leadership acknowledged in its latest meeting that the economy is facing challenges and promised to accelerate government budget expenditures. Meanwhile, experts from the Eurasia Group note that "officials continue to prioritize risk containment over short-term economic growth."
