China’s official PMI just above 50 in June

China’s official purchasing managers’ index (PMI) for the manufacturing industry slipped to 50.1 points in June, signaling a slowdown in the sector.

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The latest reading of 50.1 points, compared with 50.8 points in May, was the lowest since February 2013, according to China Federation of Logistics & Purchasing (CFLP)’s announcement on Monday July 1.

Falling new orders and reduced production added pressure to manufacturers in June and steel mills were no exception to the trend.

"The majority of Chinese steel mills are suffering heavy losses, and it is expected that the steel PMI will remain below 50 in June, meaning steel mills are not expanding their output, inventory or other activities," a steel industry analyst in Beijing said.

While crude steel output in China has remained at a high level this year, sparking over-supply concerns, daily production levels in mid-June were at 2.16 million tonnes, up 0.4% from the start of the month, but down from 2.18 million tonnes in mid-May, according to estimates from China Iron & Steel Assn.

The slide in the June PMI points to the downward pressure China’s economy will face in the near future, but the absolute PMI was still above the 50 threshold, analyst Zhang Liqun, said in CFLP’s announcement.

A PMI above 50 indicates an expansion in manufacturing sector activity, while below suggests a contraction.

HSBC’s manufacturing PMI for the same month stood at 48.2, compared with a preliminary PMI for the month of 48.3 and 49.2 in May.

CFLP Steel Logistics Professional Committee has yet to announce the steel PMI for June. The index was at 64.8 in May.

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