Official manufacturing PMI fell to a three-month low of 49.3 in July as demand weakened. IP and export growth may have moderated on tariff impact and fading front-loading activity. FAI and retail sales growth likely recovered from June’s drop, partly due to normalisation. CPI inflation may have turned negative, while PPI deflation likely eased on a spike in commodity prices, Standard Chartered's economists Hunter Chan and Shuang Ding report.

PMIs indicate broad-based slowdown in July

"China’s official manufacturing PMI edged down to 49.3 in July from 49.7 in June, as the new orders PMI fell 0.8pts into contractionary territory. In addition, new export orders fell 0.6pts, hinting at weaker external demand ahead of the US’ global reciprocal tariffs effective 1 August. As a result, the production PMI edged down 0.5pts to 50.5. In addition, the services PMI inched down to 50 and the construction PMI fell 2.2pts from June partly due to the weather impact."

"We expect export and industrial production (IP) growth to have eased on weaker demand, fading front-loading activity and the tariff impact. Imports likely contracted due to base effects, helping to keep the monthly trade surplus sizeable. Monthly fixed asset investment (FAI) likely improved modestly on a 2Y CAGR basis, with housing investment likely remaining a key drag. Retail sales growth may have rebounded, normalising from a sharp slump in June, supported by the trade-in programme."

"CPI inflation may have fallen to -0.4% y/y in July after a short-lived rebound in June, as food CPI likely fell for another month and services CPI likely stayed soft, offsetting the increase in fuel prices. PPI deflation likely moderated, partly due to a jump in domestic commodity prices. We estimate that total social financing (TSF) growth accelerated further on solid government bond and corporate bond financing."