Manufacturing activity has demonstrated resilience, with the PMI index rising above the expansion threshold in June, slightly exceeding the average level for the same period in recent years. The primary drivers for this improvement were simultaneous expansion in both production and demand, coupled with the continued strong performance of high-tech industries.
The key data shows that the manufacturing Purchasing Managers' Index (PMI) increased by 0.3 percentage points month-on-month to 50.3% in June. This figure is marginally higher than the historical average for the period, indicating sustained resilience in the manufacturing sector's momentum. Breaking down the components, the production index accelerated by 0.2 percentage points to 51.4%, while the new orders index saw a more significant increase of 1.3 percentage points to 51.2%. Although price indices retreated slightly, they remained at elevated levels. The gap between manufacturing production and demand narrowed compared to the previous month, suggesting an improvement in economic momentum.
Regarding price trends, the spread between the ex-factory price and the purchase price within the manufacturing PMI narrowed to -6% in June, a reduction of 2.6 percentage points from the prior reading. The ex-factory price index stood at 48.2%, down 3.7 percentage points month-on-month, while the cost of upstream raw materials was at 54.2%, down 6.3 percentage points. On inventory, both raw material and finished goods stockpiles declined in June. However, the procurement quantity indicator increased, signaling an improvement in downstream demand. This suggests enterprises were strategically restocking with lower-priced raw materials. The economic cycle remains in the early stages of bottoming out, with employment indicators still weak. Further accumulation of recovery momentum is required to alleviate contractionary pressures.
Company Structure and Industry Performance
Examining enterprise structure, the PMI performance for large, medium, and small-sized firms continued to diverge in June. Large enterprises saw a slight decline in their index but remained in expansionary territory. Medium-sized enterprises' index rebounded into expansionary territory, while small enterprises' index continued to decline. The acceleration of project initiations in June, supported by the distribution of the second batch of major project lists in mid-April, underpinned the robust performance of large and medium-sized enterprises. By industry, the high-tech manufacturing sector maintained a high level of activity, followed by the equipment manufacturing sector. The consumer goods and raw materials manufacturing sectors showed little change in their activity levels.
Non-Manufacturing Sector Update
The non-manufacturing PMI edged up by 0.1 percentage points month-on-month to 50.2% in June. Within this, the services PMI increased by 0.1 percentage points to 50.4%, indicating a continued gentle improvement. The construction PMI rose by 0.2 percentage points to 49%, with its new orders sub-index increasing by 2.8 percentage points. This points to a marginal recovery in demand for construction projects and an improvement in corporate investment willingness and construction commencement plans. Looking ahead, as demand from urban renewal initiatives and infrastructure network projects is gradually released, the sector's activity level is expected to continue its improving trend.