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China manufacturing activity slows to 3-month low

A private gauge of China’s manufacturing activity fell to a three-month low in June, as a recent uptick in Covid-19 cases and supply-chain logjams weighed on output and dampened demand.

The Caixin China purchasing managers index dropped to 51.3 in June compared with 52.0 in May, Caixin Media Co. and researcher Markit said Thursday.

The result points in the same direction as a competing official gauge, which slipped to 50.9 in June from 51 in May, China’s statistics bureau said Wednesday. Both the Caixin and official surveys noted disruptions brought by softening external demand and coronavirus resurgences in southern China’s Guangdong province, an export and economic stronghold.

Caixin PMI’s subindex for new export orders dropped at a steeper pace than those for output and total new orders in June, as the new infections in Guangdong and overseas affected both supply and demand, said Wang Zhe, a senior economist at Caixin Insight Group.

Despite deceleration of factory activity, manufacturers continued to add staff. The measure for employment hit the highest level in seven months and reached the second-highest since January 2013, Caixin said.

Another positive note was the easing price pressure. Both input and output prices fell in June, though they stayed in expansionary territory, Caixin said. High prices of metals and energy commodities were the main forces driving up industrial prices last month, according to surveyed manufacturers.

Mr. Wang said inflationary pressure, coupled with economic slowdown in the second half of the year, would pose “a serious challenge for China.”

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