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China’s factory activity unexpectedly contracts in July as export momentum fades

China’s factory activity unexpectedly contracts in July as export momentum fades

China’s services sector also slowed in July, with the private general services PMI falling to 50.4 from 54.1 as domestic demand softened, while Hong Kong’s private-sector growth cooled and job cuts accelerated.

Fact Check
Multiple sources reporting China's National Bureau of Statistics official data corroborate the core claim. Per 'China's factory activity unexpectedly contracts in July' (CNBC), manufacturing PMI fell to 49.2 (contraction). Per 'China Services Activity Returns to Contraction' (Trading Economics), the non-manufacturing PMI fell to 49.0, with services at 49.3 and construction at 47.0 — confirming all three (manufacturing, services, construction) softened. That same source confirms business expectations improved to 55.4, remaining above 54. 'China NBS General PMI Lowest Since Late 2022' confirms the composite fell to 49.3. The equipment/high-tech/digital-economy expansion detail aligns with NBS's standard reporting structure highlighting strong sub-sectors. The only minor uncertainty is the specific 'equipment, high-tech and digital-economy' expansion phrasing, which is consistent with but not word-for-word verified in the fetched sources.
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Summary

China’s economic momentum weakened further in July as services activity slowed sharply alongside a surprise contraction in official factory activity, while Hong Kong’s private sector also lost pace. S&P Global’s seasonally adjusted China services PMI fell to 50.4 in July from 54.1 in June, the lowest since September 2024, leaving the sector only marginally in expansion territory and broadly aligning with earlier official data that showed softer conditions. The services survey pointed to weak domestic demand as the main drag. Growth in total new business slowed to its weakest pace since March, with firms reporting soft local demand and cautious customer spending. External demand remained a relative support, however, as new export business expanded for a third consecutive month, helped by trade fair activity, demand for summer study tours and research trips, higher financial transaction settlement volumes and internal efficiency improvements in serving overseas clients. Employment in China’s services sector rose for a third straight month, the longest run of job creation since the second half of 2024, though hiring slowed from June as firms turned more cautious on the outlook. Cost pressures continued to ease, while some companies attempted to raise selling prices to pass through modest cost increases in a competitive market. Business confidence stayed positive but fell to its lowest level since February 2020, reflecting concerns about the durability of the recovery and the strength of domestic demand. China’s composite PMI output index fell to 50.8 from 53.6, the slowest pace of overall expansion in a year. In Hong Kong, S&P Global data showed the private-sector PMI slipped to 51 in July from 52 in June. Business conditions improved for a third straight month, but more slowly, as order growth moderated and export demand showed little change. Companies responded by cutting purchasing, trimming inventories and reducing headcount, with job shedding the sharpest since August 2023. Input-cost and selling-price inflation both eased, while pessimism about the year-ahead outlook deepened amid concern over the local economy.

Terms & Concepts
  • PMI: A survey-based index of business activity, where readings above 50 indicate expansion and below 50 indicate contraction.
  • composite PMI output index: A combined measure of business activity across manufacturing and services sectors.
  • new export business: A PMI indicator tracking demand from overseas customers for a company’s goods or services.